<PAGE>
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
OCC ACCUMULATION TRUST
(Name of Registrant as Specified in Its Charter)
Elliot M. Weiss, Secretary
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
OCC ACCUMULATION TRUST
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
MARCH 3, 2000
TO THE SHAREHOLDERS:
A special meeting of the shareholders of the OCC Accumulation Trust (the
"Trust") will be held at the principal executive offices of the Trust, 1345
Avenue of the Americas, New York, New York 10105-4800, on March 3, 2000 at
10:00 a.m., New York time for the following purposes:
1. To approve a new investment advisory agreement between OpCap Advisors
and the Trust;
2. To approve an investment sub-advisory agreement by and among OpCap
Advisors and Pacific Investment Management Company for the Managed
Portfolio;
3. To elect six trustees to hold office until their successors are
elected and qualified;
4. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditor of the Trust for the fiscal year ending December 31, 2000;
You will be entitled to notice of, and to vote at, the meeting and any
adjournments thereof, if you owned shares of the Trust at the close of business
on December 15, 1999. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN
PERSON. IF YOU DO NOT EXPECT TO ATTEND THE MEETING PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE
PROMPTLY.
By Order of the Board of Trustees
/s/ Elliot M. Weiss
---------------------------------
Secretary
1345 Avenue of the Americas
New York, New York 10105-4800
<PAGE>
YOUR VOTE IS IMPORTANT
PLEASE RETURN YOUR VOTING INSTRUCTION FORM PROMPTLY
Contractholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed voting instruction form for each of
the Portfolios of the Trust in which they own shares and to date, sign and
return it in the envelope provided, which needs no postage if mailed in the
United States. We ask for your cooperation in mailing your voting instruction
form no matter how large or small your holding may be.
PLEASE RESPOND -- YOUR VOTE IS IMPORTANT
1
<PAGE>
DRAFT
01/20/00
OCC ACCUMULATION TRUST
1345 Avenue of the Americas
NEW YORK, NEW YORK 10105-4800
_________________
PROXY STATEMENT
_________________
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 3, 2000
_________________
GENERAL
This Proxy Statement is furnished to the shareholders of OCC Accumulation
Trust, a Massachusetts business trust (the "Trust"), in connection with the
solicitation by management of proxies to be used at a special meeting (the
"Meeting") of shareholders to be held on March 3, 2000, or any adjournment or
adjournments thereof.
1
<PAGE>
The Notice of Meeting, Proxy Statement and Voting Instruction Form will first be
mailed on or about February 7, 2000.
The first purpose of the Meeting is to permit shareholders of each
Portfolio of the Trust to consider a new advisory agreement to take effect upon
consummation of the transaction (the "Acquisition") contemplated by an
Implementation and Merger Agreement, dated as of October 31, 1999 (the "Merger
Agreement"), by and among PIMCO Advisors L.P. ("PIMCO Advisors"), its two
general partners, PIMCO Advisors Holdings L.P. ("PAH") and PIMCO Partners G.P.
("Partners GP"), certain of their affiliates, Allianz of America, Inc. ("Allianz
of America") and certain other parties named therein. Pursuant to the Merger
Agreement, Allianz of America will acquire a controlling interest in PIMCO
Advisors, whose wholly owned indirect subsidiary, OpCap Advisors, serves as
investment adviser to the Trust. For a discussion of the Acquisition, see "The
Acquisition" under Proposal 1 below. As required by the Investment Company Act
of 1940, as amended (the "Investment Company Act"), consummation of the
Acquisition will cause the automatic termination of the Trust's advisory
agreement with OpCap Advisors. Therefore, in order to ensure continuity in the
management of the Trust, shareholders of each Portfolio of the Trust are being
asked to approve a new advisory agreement.
The second purpose of the Meeting is to permit shareholders of the Managed
Portfolio to consider an investment sub-advisory agreement by and among OpCap
Advisors and Pacific Investment Management Company ("PIMCO") to take effect on
March 3, 2000 (the "Sub-Advisory Agreement").
2
<PAGE>
The third purpose of the Meeting is to elect six Trustees to hold office
until their successors are elected and qualified.
The fourth purpose of the Meeting is to ratify the selection of
PricewaterhouseCoopers LLP as independent auditor for the Trust for the fiscal
year ending December 31, 2000.
Shares of beneficial interest ("Shares") of the Trust are presently sold to
life insurance companies ("Life Companies") for allocation to Variable Accounts
established by those Life Companies (collectively, the "Variable Accounts") to
provide benefits to contractholders ("Contractholders") of variable annuity
contracts and variable life insurance policies (collectively, "Contracts")
issued by those Life Companies. Instructions of Contractholders are being
solicited for the approval or disapproval of the investment advisory agreement
for the Portfolios of the Trust, the Sub-Advisory Agreement and the New Sub-
Advisory Agreement for the Managed Portfolio, the election of Trustees and the
ratification of PricewaterhouseCoopers LLP as independent auditor for the Trust.
The Trust currently consists of seven portfolios (the "Portfolios"), each
of which is a separate series of shares of beneficial interest: the Equity
Portfolio, Mid Cap Portfolio, Small Cap Portfolio, Global Equity Portfolio,
Managed Portfolio, Balanced Portfolio, and U.S. Government Income Portfolio.
Shares of the Portfolios will be voted separately, with each Portfolio
voting as a single class on the proposal. Each full share of the Portfolios
outstanding is entitled to one vote and each fractional share of the Portfolios
outstanding is entitled to a proportionate fractional share of one vote for such
purposes.
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<PAGE>
In order that you may be represented at the Meeting or any adjournment or
adjournments thereof, you are requested to indicate your voting instructions on
the enclosed voting instruction form, to date and sign the form, and to mail the
form promptly in the enclosed postage paid envelope, allowing sufficient time
for the form to be received before the Meeting. Abstentions will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum and will have the effect of a negative vote.
A quorum for the Meeting will consist of a majority of the shares of each
of the Portfolios issued and outstanding and entitled to vote, present in person
or represented by proxy. If, by the time scheduled for the Meeting, a quorum is
not present or if a quorum is present but sufficient voting instructions in
favor of the proposal described in this Proxy Statement are not received from
Contractholders, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of voting
instructions from Contractholders. Any such adjournment will require the
affirmative vote of a majority of the shares of the Trust present in person or
by proxy at the session of the Meeting to be adjourned. The persons named as
proxies will vote in favor of any such adjournment if they determine that such
adjournment and additional solicitation are reasonable and in the interests of
the Portfolios' shareholders.
Voting instructions may be revoked at any time prior to the voting thereof
by: (i) written instructions addressed to the Secretary of the Trust at 1345
Avenue of the Americas, New York, New York 10105-4800; (ii) attendance at the
Meeting and voting in person or (iii) properly executing and returning a new
voting instruction form (if received in time to be voted). Mere attendance at
the Meeting will not revoke voting instructions.
All expenses of the preparation and distribution of these proxy materials
will be borne equally by PIMCO Advisors and Allianz of America. In addition to
the solicitation of voting instructions by the use of the mails, voting
instructions may be solicited by officers and employees of OpCap Advisors, the
Life Companies, or their respective affiliates, personally or by telephone or
telegraph. Management Information Services has been retained to assist in the
solicitation of proxies for a fee based on the number of insurance company
contract/policy owners eligible to submit voting instructions to each of the
Separate Accounts holding voting positions in the various Portfolios of the
Trust as of the record date which fee is estimated not to exceed $55,000 plus
reasonable out-of-pocket expenses.
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<PAGE>
The table below summarizes each proposal to be voted upon at the Meeting to
be held on March 3, 2000 and identifies which Portfolio shareholders are being
requested to approve each proposal.
<TABLE>
<CAPTION>
PROPOSALS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Portfolio Approval Approval of Election of Ratification
of sub-Advisory Trustees of Price
Advisory Agreement Waterhouse
Agreement Between PIMCO Coopers as
Between and OpCap Independent
OpCap Advisors Accountants
Advisors
and the
Trust
- ---------------------------------------------------------------------------------------------
Equity Portfolio X X X
- ---------------------------------------------------------------------------------------------
Mid Cap Portfolio X X X
- ---------------------------------------------------------------------------------------------
Small Cap X X X
Portfolio
- ---------------------------------------------------------------------------------------------
Global Equity X X X
Portfolio
- ---------------------------------------------------------------------------------------------
Managed Portfolio X X X X
- ---------------------------------------------------------------------------------------------
Balanced Portfolio X X X
- ---------------------------------------------------------------------------------------------
U.S. Government
Income Portfolio X X X
- ---------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
PROPOSAL NO. 1
APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN OPCAP ADVISORS
AND THE TRUST
INTRODUCTION
OpCap Advisors serves as investment adviser to the Trust pursuant to
an Investment Advisory Agreement dated November 5, 1997 as amended February 1,
1998 (the "Existing Agreement"). The Existing Agreement was approved initially
by the Board of Trustees at a special meeting held on February 28, 1997 and was
approved by the Trust's shareholders on October 14, 1997.
The Existing Agreement provides that it shall automatically terminate in
the event of its assignment as defined in the Investment Company Act.
Consummation of the Acquisition will constitute an assignment of the Existing
Agreement. Therefore, in anticipation of the Acquisition, the Board of Trustees
of the Trust is proposing that its shareholders approve a new advisory agreement
between the Trust and OpCap Advisors (the "New Agreement"). The New Agreement
is substantially identical, except for the date, to the Existing Agreement.
INFORMATION ABOUT OPCAP ADVISORS
OpCap Advisors is a majority-owned subsidiary of Oppenheimer Capital, a
registered investment adviser with approximately $56 billion in assets under
management on September 30, 1999. Oppenheimer Capital is an indirect wholly-
owned subsidiary of PIMCO Advisors, a registered investment adviser. The
general partners of PIMCO Advisors are PIMCO Partners G.P. and PIMCO Advisors
Holdings L.P. PIMCO Partners G.P. is a general partnership between PIMCO
Holding LLC, a Delaware limited liability company and an indirect wholly-owned
subsidiary of Pacific Life Insurance Company, and PIMCO Partners LLC, a
California limited liability company controlled by the current Managing
Directors and two former Managing Directors of Pacific Investment Management.
PIMCO Partners, G.P. is the sole general partner of PIMCO Advisors Holdings L.P.
6
<PAGE>
The principal business address of OpCap Advisors, Oppenheimer Capital and
their affiliates is 1345 Avenue of the Americas, New York, New York 10105-4800.
The principal business address of OpCap Advisors would not change following the
Acquisition. Joseph La Motta is Chairman Emeritus of Oppenheimer Capital.
Kenneth Poovey is Chief Executive Officer of Oppenheimer Capital and OpCap
Advisors.
The officers of the Trust who are officers or employees of OpCap Advisors
or its affiliate, Oppenheimer Capital, are as follows:
<TABLE>
<CAPTION>
Name Position with Trust
- ---- -------------------
<S> <C>
Joseph M. La Motta President and Chairman of the Board of Trustees
Bernard H. Garil Vice President
Mark F. Degenhart Vice President and Portfolio Manager
Richard A. Glasebrook Vice President and Portfolio Manager
Colin J. Glinsman Vice President and Portfolio Manager
Louis P. Goldstein Vice President and Portfolio Manager
Vikki Hanges Vice President and Portfolio Manager
John Lindenthal Vice President and Portfolio Manager
Timothy J. McCormack Vice President and Portfolio Manager
James Sheldon Vice President and Portfolio Manager
Elliot M. Weiss Secretary
Brian S. Shlissel Treasurer
Maria Camacho Assistant Secretary
</TABLE>
7
<PAGE>
Attached to this Proxy Statement as Exhibit A is a list of other funds
advised or subadvised by OpCap Advisors that have similar investment objectives
to those of the Portfolios, their net assets and the rate of the advisory fee
paid to OpCap Advisors.
INFORMATION CONCERNING ALLIANZ AG AND ITS AFFILIATES. Allianz of America is a
holding company that owns several insurance and financial service companies and
is a subsidiary of Allianz AG, a publicly traded German Aktiengesellschaft and
which, together with its subsidiaries, comprise the world's second largest
insurance group as measured by premium income. The Allianz group is a leading
provider of financial services, particularly in Europe, and is represented in 68
countries world-wide through subsidiaries, branch and representative offices,
and other affiliated entities. The Allianz group currently has assets under
management of more than $390 billion, and in its last fiscal year wrote
approximately $50 billion in gross insurance premiums. After completion of the
Acquisition, PIMCO Advisors and the Allianz group combined will have over $650
billion in assets under management. Allianz AG's address is: Koniginstrasse 28,
D-80802, Munich, Germany.
THE ACQUISITION
On October 31, 1999, PIMCO Advisors, its two general partners, PAH and
Partners GP, certain of their affiliates, Allianz of America and certain other
parties named therein entered into the Merger Agreement pursuant to which
Allianz of America will acquire majority ownership of PIMCO Advisors, whose
wholly-owned subsidiary, OpCap Advisors, serves as investment adviser to the
Trust.
The Merger Agreement provides for the acquisition of PAH by Allianz of
America through a merger of a subsidiary of Allianz of America with and into
PAH. In the merger, each of the outstanding limited partnership and general
partner units in PAH will be converted into the right to receive cash in an
amount per unit equal to $38.75, subject to downward adjustment if the aggregate
annualized investment advisory and subadvisory fees for all accounts managed by
PIMCO Advisors and its subsidiaries, expressed as a "revenue run rate," declines
(excluding
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<PAGE>
market-based changes) below a specified level (the "Unit Transaction Price"). In
no event will the Unit Transaction Price be reduced below $31.00 per unit. As a
result of the merger, PAH will become an indirect wholly-owned subsidiary of
Allianz of America.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire for cash additional partnership interests in PIMCO
Advisors (the "PA Units"), bringing its ownership interest in PIMCO Advisors to
approximately 70%, including the approximate 44% interest held thorugh PAH. As
part of these transactions, a subsidiary of Allianz of America will acquire
Partners GP through an acquisition of the managing general partner interest in
Partners GP from PIMCO Partners LLC (the managing general partner of Partners
GP) for approximately $5.5 million and of the member interests in Partners GP
that are indirectly owned by Pacific Life Insurance Company ("Pacific Life").
Pacific Life, which through subsidiaries owns approximately a 30% interest in
PIMCO Advisors, will maintain an indirect interest in PIMCO Advisors following
the closing.
In connection with the closing, Allianz of America will enter into
a put/call arrangement for the possible disposition of Pacific Life's indirect
interest in PIMCO Advisors. The put option held by Pacific Life will allow it to
require Allianz of America, on the last business day of each calendar quarter
following the closing, to purchase at a formula-based price all of the PIMCO
Advisors' units owned directly or indirectly by Pacific Life. The call option
held by Allianz of America will allow it, beginning January 31, 2003 or upon a
change of control of Pacific Life, to require Pacific Life to sell or cause to
be sold to Allianz of America, at the same fomula-based price, all of the PIMCO
Advisors' units owned directly or indirectly by Pacific Life.
As a result of the Acquisition, Allianz of America will control PIMCO
Advisors, having acquired approximately 70% of the outstanding partnership
interests in PIMCO Advisors, for a total consideration of approximately $3.3
billion, while the remainder will continue to be indirectly owned by Pacific
Life. Through PIMCO Advisors, Allianz of America will also control OpCap
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<PAGE>
Advisors. The Acquisition is expected to be completed by the end of the first
quarter of 2000, although there is no assurance that the Acquisition will be
completed.
OpCap Advisors serves as investment adviser to the Trust and will undergo a
change of control as a result of the consummation of the Acquisition, resulting
in the automatic termination of its current advisory agreement with the Trust
(the "Existing Agreement"). The Board of Trustees of the Trust have approved
the new investment management agreement and recommend that Shareholders approve
it as well. Therefore, in connection with the Acquisition and as required by
the Investment Company Act, shareholders of each Portfolio of the Trust are
being asked in Proposal 1 to approve a new investment management agreement
between the Trust and OpCap Advisors which is substantially identical to the
Existing Management Agreement (the "New Agreement"). If the Acquisition is not
completed for any reason, the Existing Agreement will remain in effect.
Completion of the Acquisition is subject to a number of conditions
including, among others, (i) the approval of the public unitholders of PAH, (ii)
the receipt of certain regulatory approvals and (iii) PIMCO Advisors' revenue
run-rate for all accounts managed by PIMCO Advisors and its subsidiaries being
at least 75% of the September 30, 1999 amount. PIMCO Advisors has agreed to use
its reasonable best efforts to obtain, prior to completion of the Acquisition,
the approval of the New Agreement by the shareholders of each Portfolio of the
Trust. In the event the New Agreement is not approved by the Trust's
shareholders and the Acquisition is completed, the Board of Trustees of the
Trust will consider appropriate action.
Pursuant to the Merger Agreement, PIMCO Advisors and Pacific Investment
Management Company, a subsidiary partnership of PIMCO Advisors, will enter into
employment, retention and incentive arrangements with key employees of PIMCO
Advisors and Pacific Investment Management Company. These benefits include new
employment agreements, retention and incentive awards vesting over a term of
years and restricted stock grants. In addition, certain key employees of
Oppenheimer Capital and OpCap Advisors will receive payments in respect of
previously existing non-competition arrangements in connection with the
acquisition by Allianz of America of the PA Units on which such arrangements
were based.
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<PAGE>
EFFECTS OF THE ACQUISITION. Upon completion of the Acquisition, OpCap
Advisors, its parent Oppenheimer Capital, and Oppenheimer Capital's parent,
PIMCO Advisors, will be controlled by Allianz of America. Allianz of America
will control PIMCO Advisors through its managing member interest in
Pacific-Allianz Partners LLC ("PacPartners LLC"), which will be the sole general
partner of PIMCO Advisors following the Acquisition. While Allianz of America
will control PacPartners LLC, Pacific Life will hold a portion of its continuing
interest in PIMCO Advisors through an interest in PacPartners LLC. Allianz of
America, through subsidiaries, will be the managing member of PacPartners LLC
and will have full authority and control over all actions taken by PacPartners
LLC as the general partner of PIMCO Advisors, provided that Pacific Life's
consent is required for certain extraordinary actions.
Operationally, OpCap Advisors, Oppenheimer Capital and PIMCO Advisors
(collectively, the "Advisors") are expected to become units of Allianz Asset
Management ("AAM"), the division of Allianz AG that coordinates global Allianz
AG asset management activities. The equity operations of PIMCO Advisors, OpCap
Advisors and Oppenheimer Capital will remain separately branded and managed.
PIMCO Advisors, OpCap Advisors and Oppenheimer Capital are currently expected to
continue to operate in the United States under their existing names.
Both William S. Thompson Jr., the current Chief Executive Officer of PIMCO
Advisors, and William H. Gross, the current Chief Investment Officer of Pacific
Investment Management Company, will have roles on the Executive Committee of
AAM, with Mr. Thompson serving as the Executive Committee's Deputy Chairman.
Messrs. Thompson and Gross will enter into employment contracts with a term of
seven years following the Acquisition. Other key employees of the Advisors have
also contractually agreed to remain with their respective employers following
the Acquisition.
Affiliates of Allianz AG currently include Dresdner Bank AG, Deutsche Bank
AG, Munich Re, and HypoVereinsbank. These entities, as well as certain broker-
dealers that might be deemed to be controlled by or
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<PAGE>
affiliated with these entities, such as Bankers Trust Company, BT Alex. Brown
Incorporated, Deutsche Bank Securities, Inc. and Dresdner Kleinwort Benson North
America LLC, may be considered as "Affiliated Brokers". Once the Acquisition is
completed, absent an SEC exemption or other relief, the Trust would generally be
precluded from effecting principal transactions with the Affiliated Brokers, and
its ability to purchase securities from underwriting syndicates including an
Affiliated Broker or to utilize the Affiliated Brokers for agency transactions
would be subject to restrictions. Each of the Advisors does not believe that the
restrictions on transactions with the Affiliated Brokers described above will
materially adversely affect its ability, post-closing, to provide services to
the Trust, the Trust's ability to take advantage of market opportunities, or the
Trust's overall performance. Investment companies for which none of the Advisors
serves as investment adviser would not, in general, be subject to these same
restrictions post-closing.
SECTION 15(F) OF THE INVESTMENT COMPANY ACT
Section 15(f) of the Investment Company Act is available to PIMCO Advisors
in connection with the Allianz of America's acquisition of a controlling
interest in PIMCO Advisors and the other Advisors. Section 15(f) provides in
substance that when a sale of a controlling interest in an investment adviser
occurs, the investment adviser or any of its affiliated persons may receive any
amount or benefit in connection therewith as long as two conditions are
satisfied. First, an "unfair burden" must not be imposed on the investment
company as a result of the transaction relating to the sale of such interest, or
any express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden" (as defined in the Investment Company Act) includes any
arrangement during the two-year period after the transaction whereby the
investment adviser (or predecessor or successor adviser), or any "interested
person" (as defined in the Investment Company Act) of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
investment company. The Trust's Board of Trustees is aware of no circumstances
arising from the Acquisition that might result in an unfair burden being imposed
on the Trust. Allianz of America and each of the other parties to the Merger
Agreement have agreed to use
12
<PAGE>
their reasonable best efforts to assure compliance with Section 15(f) as it
applies to the Acquisition during such two-year period.
The second condition of Section 15(f) is that during the three-year period
following the consummation of the Acquisition, at least 75% of the investment
company's board of directors must not be "interested persons" of the investment
adviser or predecessor adviser. The composition of the Board of Trustees is
presently in compliance with the 75% requirement and Allianz of America has
agreed with the Advisors that it will use its reasonable best efforts to comply
with such 75% requirement during such three-year period through one or more
intermediaries.
EXISTING AND NEW AGREEMENT
The Existing Agreement and the New Agreement are substantially identical.
The following description of the New Agreement is qualified in its entirety by
reference to the form of the New Agreement attached hereto as Exhibit B.
SERVICES TO BE PERFORMED
Under both the Existing and New Agreements, OpCap Advisors is required to:
(i) regularly provide investment advice and recommendations to each Portfolio of
the Trust with respect to its investments, investment policies and the purchase
and sale of securities; (ii) supervise continuously and determine the securities
to be purchased or sold by the Trust and the portion, if any, of the assets of
each Portfolio of the Trust to be held uninvested; and (iii) arrange for the
purchase of securities and other investments by each Portfolio of the Trust and
the sale of securities and other investments held by each Portfolio of the
Trust.
Unlike the Existing Agreement, the New Agreement will also authorize OpCap
Advisors to: (i) select and contract at its own expense with PIMCO Advisors and
PIMCO Equity Advisors to provide the services described above on behalf of the
Blended Equity, Large Cap Growth, Small Cap Growth, Target, Innovation and
Managed
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Portfolios and with other sub-advisers in the future on behalf of any of the
existing Portfolios and any Portfolios of the Trust which may be established in
the future; and (ii) supervise and monitor the performance of sub-advisers,
including recommending their termination and replacement where appropriate.
The Existing and New Agreements also require OpCap Advisors to provide
administrative services for the Trust, including (i) coordination of the
functions of accountants, counsel and other parties performing services for the
Trust and (ii) preparation and filing reports required by federal securities
laws, shareholder reports and proxy materials.
FEES AND EXPENSES
The fees payable to OpCap Advisors under the New Agreement will be at the
same rate as the fees payable under the Existing Agreement. Under the Existing
Agreement, the Trust pays OpCap Advisors at the annual rate of .80% of the first
$400 million of average net assets, .75% on the next $400 million of average net
assets and .70% of assets in excess of $800 million with respect to the Equity,
Global Equity, Managed, Small Cap, Mid Cap, Balanced, Blended Equity, Large Cap
Growth, Small Cap Growth, Target and Innovation Portfolios. The rate applicable
to the U.S. Government Income Portfolio is .60% of average net assets. Under
the New Agreement, OpCap Advisors will use a portion of the fees it receives
from the Managed Portfolio to pay PIMCO a fee equal to an annual rate of .25% of
the average net assets of the Managed Portfolio for investment advisory services
PIMCO renders to that Portfolio as described under Proposal No. 2 to this Proxy
Statement.
Under the Existing and New Agreement, OpCap Advisors will pay PIMCO Equity
Advisors fees at the annual rate of .40% of the first $400 million of average
net assets, .375% on the next $400 million of average net assets and .35% of
assets in excess of $800 million with respect to the Blended Equity, Large Cap
Growth, Small Cap Growth, Target and Innovation Portfolios for investment
advisory services PIMCO Equity Advisors renders to those Portfolios as described
under Proposal No. 4 to this Proxy Statement.
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<PAGE>
Under the Existing and New Agreement, expenses not expressly assumed by
OpCap Advisors [or by OCC Distributors, the Trust's principal underwriter], are
paid by the Trust. The Agreement lists examples of expenses paid by the Trust,
of which the major categories relate to interest, taxes, fees to non-interested
trustees, legal and audit expenses, custodian and transfer agent expenses, stock
issuance costs, certain printing and registration costs, and non-recurring
expenses including litigation.
Under the Existing and New Agreement, OpCap Advisors will waive its
management fee and reimburse expenses so that the total operating expenses (net
of any expense offsets and excluding the amount of any interest, taxes,
brokerage commissions and extraordinary expenses) of each Portfolio of the
Trust, except the Global Equity Portfolio, do not exceed 1.00% of its respective
average daily net assets. OpCap Advisors will also waive its management fee and
reimburse expenses so that the total operating expenses (net of any expense
offsets and excluding the amount of any interest, taxes, brokerage commissions
and extraordinary expenses) of the Global Equity Portfolio do not exceed 1.25%
of its respective average daily net assets.
For the fiscal year ended December 31, 1999, the total advisory fees
accrued or paid by the Equity, Global Equity, Managed, Small Cap, Mid Cap,
Balanced and U.S. Government Income Portfolios were $498,512, $302,528,
$6,116,104, $1,206,779, $27,810, $-0- and $63,217.
LIMITATION OF LIABILITY. The New Agreement provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties or obligations, OpCap Advisors shall not be liable to the Trust for any
act or omission in the course of or connected with rendering services under the
New Agreement or for any losses that may be sustained in the purchase, holding
or sale of any security. This provision is identical to the provision on
limitation of liability in the Existing Agreement.
TERMINATION. The termination provisions of the New Agreement and the
Existing Agreement are identical. The New Agreement may be terminated by the
Trust at any time without penalty upon 60 days' written
15
<PAGE>
notice to OpCap Advisors and may be terminated by OpCap Advisors at any time
without penalty upon 90 days' written notice to the Trust. Termination by the
Trust must be approved by the vote of a majority of the Trustees or by vote of a
majority of the outstanding shares of the Trust. The New Agreement will
terminate in the event of an "assignment," as required by the Investment
Company Act.
EVALUATION BY THE BOARD OF TRUSTEES. The Board of Trustees has
determined that continuity and efficiency of portfolio management services after
the Acquisition can best be assured by approving the New Agreement. The Board
believes that the New Agreement will enable the Trust to continue to obtain
advisory services of high quality at costs which it deems appropriate and
reasonable and that approval of the New Agreement is in the best interests of
the Trust and its shareholders.
In evaluating the New Agreement, the Board of Trustees requested and
reviewed, with the assistance of independent legal counsel, materials furnished
by OpCap Advisors, PIMCO Advisors and Allianz of America. These materials
included financial statements as well as other written information regarding
OpCap Advisors and their personnel, operations, financial condition, and
brokerage policies described above. Consideration was given to comparative
performance and cost information concerning other mutual funds with similar
investment objectives, including information prepared by Lipper Analytical
Services, Inc. The Board of Trustees also reviewed and discussed the terms and
provisions of the New Agreement and compared it to the Existing Agreement as
well as the arrangements of other mutual funds, particularly with respect to the
allocation of various types of expenses, levels of fees and resulting expense
ratios. The Board evaluated the nature and extent of services provided by other
investment advisers to their respective funds and also considered the benefits
OpCap Advisors would obtain from its relationship with the Trust and the
economies of scale in costs and expenses to OpCap Advisors associated with its
providing such services. The Board also met with a representative of Allianz of
America to discuss its current intentions with respect to OpCap Advisors and
PIMCO Advisors.
16
<PAGE>
Allianz has advised Oppenheimer Capital, OpCap Advisors, and the Board that
it does not presently intend for the Acquisition to affect the future management
of Oppenheimer Capital and its subsidiary OpCap Advisors. In addition, Allianz
has advised Oppenheimer Capital, OpCap Advisors, and the Board that it presently
anticipates that the senior portfolio management teams of Oppenheimer Capital
and OpCap Advisors will continue in their present capacities and that
Oppenheimer Capital and OpCap Advisors will be able to continue to provide
advisory and management services with no material changes in operating
conditions. Allianz has represented to Oppenheimer Capital, OpCap Advisors, and
the Board that the eligibility of OpCap Advisors, under the Investment Advisers
Act of 1940, to serve as an adviser will not be affected by the Acquisition and
that the Acquisition will not affect the ability of OpCap Advisors to fulfill
its obligations under the Advisory Agreements.
The Board considered, with its counsel, (i) the quality of the operations
and service which have been provided to the Trust by OpCap Advisors and which
are expected to continue to be provided after the Acquisition, with no change in
fee rates, (ii) the overall experience and reputation of OpCap Advisors in
providing such services to investment companies, and the likelihood of its
continued financial stability, (iii) the capitalization of OpCap Advisors, PIMCO
Advisors and Allianz AG, (iv) the aspects of the Acquisition that would affect
the ability of OpCap Advisors to retain and attract qualified personnel and (v)
the benefits of continuity in the services to be provided under the New
Agreement. Based upon its review, the Board of Trustees concluded that the
terms of the New Agreement are reasonable, fair and in the best interests of the
Trust and its shareholders, and that the fees provided therein are fair and
reasonable in light of the usual and customary charges made by others for
services of the same nature and quality. Accordingly, the Board concluded that
continuing to retain OpCap Advisors as investment manager to the Trust after the
Acquisition is desirable and in the best interests of the Trust and its
shareholders. Based on these and other considerations, the Board and all
Trustees who are not interested persons of the Trust, OpCap Advisors, PIMCO
Advisors, Allianz of America, or their affiliates (the "Disinterested Trustees")
voting separately, unanimously approved the New Agreement and its submission to
shareholders for their approval. The New Agreement will become effective on the
date that the Acquisition is consummated or the date shareholders approve the
New Agreement, whichever occurs later. The New Agreement will continue in
effect until
17
<PAGE>
two years from its effective date, and thereafter for successive annual periods
as long as such continuance is approved in accordance with the Investment
Company Act. If the Acquisition is not consummated, the Existing Agreement will
remain in effect according to its terms.
VOTE REQUIRED. As provided under the Investment Company Act, approval of
the New Agreement will require the vote of a majority of the outstanding voting
securities of each Portfolio of the Trust. Under the Investment Company Act,
the vote of a "majority of the outstanding voting securities" of an investment
company (or a series thereof) means the vote, at a duly-called annual or special
meeting of shareholders, of 67% or more of the shares present at such meeting,
if the holders of more than 50% of the outstanding shares of such company or
series are present or represented by proxy, or of more than 50% of the total
outstanding shares of such company or series, whichever is less.
THE TRUSTEES, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF EACH PORTFOLIO OF THE TRUST VOTE TO APPROVE THE NEW
AGREEMENT BETWEEN THE TRUST AND OPCAP ADVISORS.
PROPOSAL NO. 2
APPROVAL OF A SUB-ADVISORY AGREEMENT BETWEEN PIMCO
AND OPCAP ADVISORS
INTRODUCTION
Shareholders of the Managed Portfolio are being asked to approve a Sub-
Advisory Agreement (the "Managed Sub-Advisory Agreement") between OpCap Advisors
and Pacific Investment Management Company ("PIMCO") to permit PIMCO to serve as
the investment sub-adviser with respect to a portion of the assets of the
Managed Portfolio (the "Sub-Advised Portion").
18
<PAGE>
INFORMATION ABOUT PIMCO
PIMCO, a Delaware general partnership, is a wholly-owned subsidiary of
PIMCO Advisors. PIMCO, which is located at 800 Newport Center Drive, Newport
Beach California 92660, is a money management firm with approximately $256
billion in assets under management as of September 30, 1999. PIMCO provides
investment management services for institutional and individual clients both
within and outside the United States.
See Proposal 1 for officers of the Trust who are officers and employees of
affiliates of PIMCO Advisors.
SERVICES TO BE PERFORMED
Under the Managed Sub-Advisory Agreement, PIMCO is required to: (i)
regularly provide investment advice and recommendations to the Managed Portfolio
with respect to its investments, investment policies and the purchase and sale
of securities; (ii) supervise continuously and determine the securities to be
purchased or sold by the Managed Portfolio within the Sub-Advised Portion; and
(iii) arrange for the purchase of securities and other investments by the
Managed Portfolio and the sale of securities and other investments held by the
Portfolio within the Sub-Advised Portion. The Managed Sub-Advisory Agreement is
attached as Exhibit C.
FEES AND EXPENSE
Under the Managed Sub-Advisory Agreement, OpCap Advisors pays PIMCO at the
annual rate of .25% of the average net assets of the Managed Portfolio for
PIMCO's investment advisory services. PIMCO will not assume any expenses for
the Managed Portfolio.
LIMITATION OF LIABILITY. The Managed Sub-Advisory Agreement provides that in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties or obligations, PIMCO shall not be liable
19
<PAGE>
to either OpCap Advisors or the Trust for any act or omission in the course of
or connected with rendering services under the Managed Sub-Advisory Agreement or
for any losses that may be sustained in the purchase, holding or sale of any
security.
TERMINATION. The Managed Sub-Advisory Agreement may be terminated by OpCap
Advisors or the Trust at any time without penalty upon 60 days' written notice
to PIMCO and may be terminated by PIMCO at any time without penalty upon 90
days' written notice to OpCap Advisors and the Trust. The Managed Sub-Advisory
Agreement will terminate in the event of an assignment as required by the
Investment Company Act.
SIMULTANEOUS APPROVAL OF POST-ACQUISITION MANAGED SUB-ADVISORY AGREEMENT.
Consummation of the Acquisition will constitute an assignment of the Sub-
Advisory Agreement. Therefore, in anticipation of the Acquisition, the Board of
Trustees of the Trust is proposing that the shareholders of the Managed
Portfolio approve a new investment sub-advisory agreement between the PIMCO and
OpCap Advisors (the "Post-Acquisition Sub-Advisory Agreement"). The Post-
Acquisition Sub-Advisory Agreement contains the same terms and provisions as and
is identical to, except for the date, the Sub-Advisory Agreement.
PORTFOLIO TRANSACTIONS AND BROKERAGE
PIMCO may use such brokers as may, in its best judgment based on all
relevant factors, implement the policy of the Trust to achieve best execution of
portfolio transactions. PIMCO is not obligated to seek advance competitive
bidding or base its selection on posted rates, but it is expected to be aware of
the current rates of most eligible brokers and to minimize the commissions paid
to the extent consistent with the interests and policies of the Trust as
established by the Board.
Consistent with obtaining the best execution of the Managed Portfolio's
transactions, PIMCO, in the interest of the Managed Portfolio may select
brokers, other than affiliated brokers, because they provide brokerage and/or
research services to the Portfolio and/or other accounts of PIMCO. The
commissions paid to such brokers
20
<PAGE>
may be higher than another qualified broker would have charged if a good faith
determination is made by PIMCO that the commissions are reasonable in relation
to the services provided, viewed either in terms of that transaction or PIMCO's
overall responsibilities to all its accounts. No specific dollar value need be
put on the services, some of which may or may not be used by PIMCO for the
benefit of the Managed Portfolio or other of its advisory clients. To show that
the determinations were made in good faith, PIMCO must be prepared to show that
the amount of such commissions paid over a representative period selected by
OpCap Advisors and\or the Board was reasonable in relation to the benefits to
the Managed Portfolio. The Managed Sub-Advisory Agreement recognizes that an
affiliated broker-dealer may act as one of the regular brokers for the Managed
Portfolio, provided that any commissions paid to such broker are calculated in
accordance with procedures adopted by the Trust's Board under rules adopted by
the Securities and Exchange Commission.
EVALUATION BY THE BOARD OF TRUSTEES. The Board of Trustees has
determined that the Managed Sub-Advisory Agreement and the Post-Acquisition
Managed Sub-Advisory Agreement will enable the Managed Portfolio to obtain
investment sub-advisory services of high quality at costs which it deems
appropriate and reasonable and that approval of the Managed Sub-Advisory
Agreement and the Post-Acquisition Managed Sub-Advisory Agreement is in the best
interests of the Managed Portfolio and its shareholders.
In evaluating the Managed Sub-Advisory Agreement and the Post-Acquisition
Managed Sub-Advisory Agreement, the Board of Trustees requested and reviewed,
with the assistance of independent legal counsel, materials furnished by OpCap
Advisors and PIMCO. These materials included information regarding PIMCO and
its personnel, operations, financial condition, and brokerage policies described
above. The Board of Trustees also reviewed and discussed the terms and
provisions of the Managed Sub-Advisory Agreement and the Post-Acquisition
Managed Sub-Advisory Agreement and compared them to the arrangements of other
mutual funds, particularly with respect to the allocation of various types of
expenses, levels of fees and resulting expense ratios. The Board evaluated the
nature and extent of services to be provided by PIMCO and also considered the
benefits PIMCO would obtain from its relationship with the Trust.
21
<PAGE>
The Board considered, with its counsel, the overall experience and
reputation of PIMCO in providing such services to investment companies, and the
likelihood of its continued financial stability. Based upon its review, the
Board of Trustees concluded that the terms of the Managed Sub-Advisory Agreement
and the Post-Acquisition Managed Sub-Advisory Agreement are reasonable, fair and
in the best interests of the Managed Portfolio and its shareholders, and that
the fees provided therein are fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and quality.
Accordingly, the Board concluded that retaining PIMCO as sub-investment manager
to the Sub-Advised Portion of the Managed Portfolio is desirable and in the best
interests of the Managed Portfolio and its shareholders. Based on these and
other considerations, the Board unanimously recommends approval of the Managed
Sub-Advisory Agreement and the Post-Acquisition Managed Sub-Advisory Agreement
and their submission to shareholders for their approval. The Managed Sub-
Advisory Agreement will become effective as soon as practicable after the date
of approval by shareholders. The Managed Sub-Advisory Agreement will continue
in effect until two years from its effective date, and thereafter for successive
annual periods as long as such continuance is approved in accordance with the
Investment Company Act, except that it will automatically terminate upon the
effectiveness of the Acquisition. Upon the consummation of the Acquisition, the
Post-Acquisition Managed Sub-Advisory Agreement will become effective and will
continue in effect until two years from its effective date, and thereafter for
successive annual periods as long as such continuance is approved in accordance
with the Investment Company Act.
VOTE REQUIRED. As provided under the Investment Company Act, approval of the
Managed Sub-Advisory Agreement and the Post-Acquisition Managed Sub-Advisory
Agreement will require the vote of a majority of the outstanding voting
securities of the Managed Portfolio. Under the Investment Company Act, the vote
of a "majority of the outstanding voting securities" of an investment company
(or a series thereof) means the vote, at a duly-called annual or special meeting
of shareholders, of 67% or more of the shares present at such meeting, if the
holders of more than 50% of the outstanding shares of such company or series are
present or represented by proxy, or of more than 50% of the total outstanding
shares of such company or series, whichever is less.
22
<PAGE>
THE TRUSTEES, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF THE MANAGED PORTFOLIO OF THE TRUST VOTE TO APPROVE THE
MANAGED SUB-ADVISORY AGREEMENT AND THE POST-ACQUISITION MANAGED SUB-ADVISORY
AGREEMENT.
PROPOSAL NO. 3
ELECTION OF TRUSTEES TO THE TRUST'S BOARD
INTRODUCTION
The Board of Trustees of the Trust currently consists of four Trustees, all
of whom are standing for re-election. Messrs. Joseph M. La Motta, Paul Y.
Clinton, Thomas W. Courtney and Lacy B. Herrmann are members of the current
Board. Two other nominees, Mssrs. V. Lee Barnes and Theodore T. Mason, have
been selected and nominated by the Disinterested Trustees and approved
unanimously by the Board of Trustees to stand for election to the Board as
Disinterested Trustees to hold office until their successors are elected and
qualified.
The following table sets forth certain information regarding each nominee.
It is the intention of the persons named in the accompanying Proxy to vote for
the election of the persons named below. Each nominee has indicated a
willingness to serve if elected. If any nominee should not be available for
election due to unforseen circumstances, it is the intention of the persons
named in the accompanying Proxy to vote for such other persons as the Board may
recommend.
23
<PAGE>
NOMINEE INFORMATION
<TABLE>
<CAPTION>
NAME AND POSITIONS WITH TRUST BUSINESS EXPERIENCE
AGE AND TERM DURING THE LAST FIVE YEARS
--- -------- --------------------------
<S> <C> <C>
Joseph M. La Chairman of the Chairman Emeritus of Oppenheimer Capital since 1997;
Motta/1/ Board of Trustees Chairman of the Board and President of OCC Cash Reserves, Inc.
Age: 66 and President
since 1994
Paul Y. Trustee since Principal of Clinton Management Associates, a financial
Clinton 1994 and venture capital consulting firm; former Director,
Age: 68 External Affairs, Kravco Corporation, a national real
estate owner and property management corporation; Trustee
of Capital Cash Management Trust, a money market fund and
Director of Narragansett Tax-Free Fund, a tax-exempt bond
fund; Director of Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest Global Value Fund, Inc., Oppenheimer
Quest Capital Value Fund, Inc., Rochester Fund
Municipals, Rochester Portfolio Series Limited Term New
York Municipals and Bond Fund Series, Oppenheimer
Convertible Securities Fund, Oppenheimer Mid Cap Fund,
OCC Cash Reserves, Inc., Trustee of Oppenheimer Quest for
Value Funds, an open-end investment company.
Lacy B. Trustee since President and Chairman of the Board of Aquila Management
Herrmann 1994 Corporation since 1984, the sponsoring organization and
Age: 69 administrator and/or advisor or sub-advisor to the
following open-end investment companies, and Chairman of
the Board of Trustees and President of each: Churchill
Cash Reserves Trust since 1985, Pacific Capital U.S.
Treasuries Cash Assets Trust since 1988, Pacific Capital
Tax-Free Cash Assets Trust since 1988, and Prime Cash
Fund from 1982 to 1996, each of which is a money market
fund, and of Churchill Tax-Free Fund of Kentucky since
1986, Tax-Free Fund of Colorado since 1986, Tax-Free
Trust of Oregon since 1985, Tax-Free Trust of Arizona
since 1985, Tax-Free Fund for Utah since 1992,
Narragansett Insured Tax Free Income Fund since 1992, and
Hawaiian Tax-Free Trust since 1984, each of which is a
tax-free municipal bond fund; Vice President, Director,
Secretary, and formerly Treasurer of Aquila Distributors,
Inc. since 1981, distributor of each of the above funds;
President and Chairman of the Board of Trustees of
Capital Cash Management Trust (CCMT), a money market
fund, since 1981 and an Officer and Trustee/Director of
its predecessors since 1974; President and Director of
STCM Management Company, Inc., sponsor and Sub-Advisor to
CCMT; Director of Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest Capital Value Fund, Inc., Oppenheimer
Quest Global Value Fund, Inc., OCC Cash Reserves, Inc.,
Rochester Fund Municipals, Rochester Portfolio Series
Limited Term New York Municipals and Bond Fund Series,
Oppenheimer Convertible Securities Fund, Oppenheimer Mid
Cap Fund, Trustee of Oppenheimer Quest for Value Funds,
an open-end investment company.
</TABLE>
- -----------------------------------
/1/ Considered an "interested person" of the Trust, as defined in Section
2(a)(19) of the Investment Company Act.
24
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITIONS WITH TRUST BUSINESS EXPERIENCE
AGE AND TERM DURING THE LAST FIVE YEARS
--- -------- --------------------------
<S> <C> <C>
Thomas W. Trustee since Principal of Courtney Associates, Inc., a venture capital
Courtney 1994 business; former General Partner of Trivest Venture
Age: 65 Fund, a private venture capital fund; former President of
Federated Investment Counseling, Inc.; Trustee of Cash
Assets Trust, a money market fund; Director of Oppenheimer
Quest Value Fund, Inc., Oppenheimer Quest Capital Value Fund, Inc.,
Oppenheimer Quest Global Value Fund, Inc., OCC Cash Reserves,
Inc., Rochester Fund Municipals, Rochester Portfolio Series
Limited Term New York Municipals and Bond Fund Series,
Oppenheimer Mid Cap Fund, Oppenheimer Convertible Securities
Fund, Trustee of Oppenheimer Quest for Value Funds, an
open-end investment company; Trustee of Hawaiian Tax-
Free Trust and Tax-Free Trust of Arizona, tax-exempt
bond funds; Director of several privately owned
corporations; and former Director of Financial
Analysts Federation.
V. Lee Nominee for Trustee President and Chief Executive Officer of Net Learning
Barnes Inc. since January 1999; Director of Davis International
Age: 64 Banking Consultants since July 1993; previously a
consultant and acting Executive Vice President of Smyth,
Sanford & Gerard L.L.C., an insurance underwriting agency.
Theodore T. Nominee for Trustee Executive Director of Louisiana Power Partners, LLC since
Mason 1999 and of East Wind Power Partners since 1994; Second
Age: 64 Vice President of the Alumni Association of SUNY Maritime
College since 1998 and Director for the same organization
since 1997; Director of Cogeneration Development of
Willamette Industries, Inc., a forest products company,
1991-1993; Vice Chairman of the Board of Trustees of CCMT
since 1981; Vice Chairman of the Board of Trustees and
Trustee of Prime Cash Fund (which is inactive) since
1982; Trustee of Short Term Asset Reserves, 1984-1986 and
1989-1996, of Hawaiian Tax-Free Trust and Pacific
Capital Cash Assets Trust since 1984, of Churchill Cash
Reserves Trust since 1985, of Pacific Capital Tax-Free
Cash Assets Trust and Pacific Capital U.S. Government
Securities Cash Assets Trust since 1988 and of Churchill
Tax-Free Fund of Kentucky since 1992.
</TABLE>
No nominee beneficially owns more than one percent of the
Trust's outstanding shares.
BOARD OF TRUSTEES' COMMITTEES AND MEETINGS
25
<PAGE>
The Board has appointed an Audit Committee, but has not appointed a
Nominating Committee and a Compensation Committee. Selection and nomination of
Disinterested Trustees has been reserved to the other Disinterested Trustees.
Shareholders may submit written recommendations to the Board regarding nominees
for Trustee, although the Board expects to be able to identify an ample number
of qualified candidates.
The Audit Committee selects, and recommends for approval by the Board and
the shareholders, the audit firm to be retained as independent auditor by the
Trust. The Audit Committee consults with the Trust's independent auditor
regarding the plan and scope of the audit, the adequacy of the Trust's internal
accounting procedures and controls and all matters relevant to the audit
services provided to the Trust. The Audit Committee also reviews the fees
charged by the auditor and the results of the audit.
The Audit Committee currently consists of Messrs. Clinton, Courtney and
Herrmann. The Board anticipates the elections of Mssrrs. Barnes and Mason as
additional Members of the Audit Committee following the election of new
Trustees.
During the fiscal year ended December 31, 1999, the Board met four times at
regularly scheduled meetings. During the year ended December 31, 1999, the
Audit Committee met once. There are no incumbent members of the Board who,
during the last fiscal year of the Trust, attended fewer than 75% of the
aggregate meetings of the Board of Trustees or its committees on which they
serve.
EXECUTIVE COMPENSATION
Members of the Board of Trustees receive an annual retainer of $40,050 and
$350 for each Board meeting attended. Audit Committee members receive an
additional $250 for each Audit Committee
- ---------------------------
/2/ The annual retainer and meeting fees are based upon the combined number of
Portfolios for OCC Cash Reserves, Inc. and the Trust and the combined net assets
of such Portfolios. The schedule set forth below illustrates the annual
retainer and meeting fees for one or more Portfolios with combined net assets
ranging from $50 to $250 million.
26
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS OF $50-$250 ANNUAL RETAINER BOARD MEETING AUDIT COMMITTEE FEE
MILLION PER PORTFOLIO FEE
<S> <C> <C> <C>
First five Portfolios $4,500 $500 $250
First six Portfolios $4,400 $450 $250
First seven Portfolios $4,300 $400 $250
First eight Portfolios $4,200 $350 $250
First nine Portfolios $4,100 $300 $250
Ten or more Portfolios $4,000 $250 $250
</TABLE>
For Portfolios with net assets of $25 million or less, no annual retainer or
meeting fees would be paid to the Trustees for the first two years of the
Portfolios' operations and half of the annual retainer and meeting fees
described in the above schedule would be paid thereafter. For Portfolios with
combined net assets ranging from $25 to $50 million, half of the annual retainer
and meeting fees described in the above schedule would be paid to each Trustee.
For Portfolios with net assets ranging from $250 million to $1 billion, the
annual retainer and meeting fees described in the above schedule plus an
additional $750 annual retainer would be paid to each Trustee. For Portfolios
with net assets over $1 billion, the annual retainer and meeting fees described
in the above schedule plus an additional $1,500 annual retainer would be paid
each Trustee.
At December 31, 1999, OCC Cash Reserves, Inc. and the Trust together offered
eleven Portfolios: two Portfolios with net assets of $25 million or less; six
Portfolios with net assets ranging from $50 to $250 million; one Portfolio with
net assets ranging from $25 to $50 million; one Portfolio with net assets
ranging from $250 million to $1 billion; and one Portfolio with net assets
over $1 billion.
27
<PAGE>
meeting attended. Trustees who are officers of the Trust are not compensated
for their service on the Board. No officer of the Trust received a salary or
fee from the Trust.
FOR FISCAL YEAR ENDED DECEMBER 31, 1999
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR RETIREMENT
AGGREGATE BENEFITS ACCRUED AS TOTAL COMPENSATION
COMPENSATION FROM PART OF TRUST FROM TRUST AND TRUST
NAME OF TRUSTEE AND AGE TRUST EXPENSES/1/ COMPLEX PAID TO
<S> <C> <C> <C>
Paul Clinton $32,438 $24,524 $114,523
Thomas Courtney $32,438 $24,524 $114,523
Lacy Herrmann $32,038 $24,524 $113,623
Joseph La Motta 0 0 0
</TABLE>
- ---------------------------------------------------
/3/ Under the retirement plan adopted by the Board in 1998, a Trustee may
receive up to 80% of his or her average compensation paid during that Trustee's
five years of service in which the highest compensation was paid. A Trustee
must serve in that capacity for the Trust or OCC Cash Reserves, Inc. for at
least 15 years to be eligible for the maximum payment.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
<TABLE>
<CAPTION>
NAME AND AGE POSITION(S) WITH TRUST AND TERM BUSINESS EXPERIENCE DURING THE LAST 5 YEARS
- ------------ ------------------------------- -------------------------------------------
<S> <C> <C>
Brian S. Shlissel Treasurer since February 2000 Vice President of Oppenheimer Capital
Age: 35 since July 1999; Vice President of
Mitchell Hutchins Asset Management Inc.
from 1993 to 1999. Assistant Treasurer
of OCC Cash Reserves, Inc., Municipal
Advantage Fund, Inc., and the Central
European Value Fund since August 1999.
Treasurer and Secretary Jardene Fleming
India Fund from 1997 to 1999. Assistant
Treasurer PaineWebber PACE Select
Advisors Trust from 1998 to 1999.
Mark F. Degenhart Vice President and Portfolio Vice President of Oppenheimer Capital
Age: 35 Manager since 1999 since January 1999; formerly Director of
Research and Portfolio Manager of
Palisades Capital Management from 1993 to
January 1999.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE POSITION(S) WITH TRUST AND TERM BUSINESS EXPERIENCE DURING THE LAST 5 YEARS
- ------------ ------------------------------- -------------------------------------------
<S> <C> <C>
Bernard H. Garil Vice President since 1994 Managing Director of Oppenheimer Capital,
Age: 58 President, Municipal Advantage Fund Inc.
and Executive Vice President of The
Central European Value Fund since 1997.
Richard A. Vice President and Portfolio Managing Director, Oppenheimer Capital
Glasebrook Manager since 1994 since 1994.
Age: 50
Louis P. Vice President and Portfolio Senior Vice President, Oppenheimer
Goldstein Manager since 1998 Capital since 1998, joined Oppenheimer
Age: 38 Capital as Vice President and Security
Analyst in 1991.
Vikki Hanges Vice President and Portfolio Senior Vice President, Oppenheimer
Age: 39 Manager since 1994 Capital since 1998; Vice President from
1992.
Elliot M. Weiss Secretary since 1999 Vice President of OpCap Advisors since
Age: 37 March 1996; Vice President of
Oppenheimer Capital from 1995 to 1996;
Assistant Vice President of Oppenheimer
Capital from 1991 to 1995. Secretary of
the Municipal Advantage Fund Inc. and OCC
Cash Reserves, Inc., and Assistant
Secretary of The Central European Value
Fund, Inc. since 1999.
Timothy J. Vice President and Portfolio Senior Vice President, Oppenheimer
McCormack Manager since 1994 Capital since 1998 and Vice President
Age: 34 since 1995.
James Sheldon Vice President and Portfolio Senior Vice President of Oppenheimer
Age: 46 Manager since 1998 Capital since February 1998; General
Partner of Omega Advisers, a hedge fund,
from September 1996 to February 1998 and
Senior Vice President and International
Portfolio Manager at Lazard Freres Asset
Management from December 1992 to August
1996.
Maria Camacho Assistant Secretary Vice President of Oppenheimer Capital since
Age: 46 since 1999 1997. Assistant Vice President from 1994-1997
and Registrations Department Administrator
with Oppenheimer Capital.
</TABLE>
The business address of each officer is 1345 Avenue of Americas, New York,
New York 10105.
VOTE REQUIRED. As provided under the Investment Company Act, the election
of the Nominees to the office of Trustee will require the vote of a majority of
the outstanding voting securities of the Trust. Under the Investment Company
Act, the vote of a "majority of the outstanding voting securities" of an
investment company
29
<PAGE>
(or a series thereof) means the vote, at a duly-called annual or special
meeting of shareholders, of 67% or more of the shares present at such
meeting, if the holders of more than 50% of the outstanding shares of such
company or series are present or represented by proxy, or of more than 50% of
the total outstanding shares of such company or series, whichever is less.
THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE
TRUST, UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH PORTFOLIO OF THE
TRUST VOTE FOR ALL NOMINEES TO THE BOARD
PROPOSAL NO. 4
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP
AS INDEPENDENT AUDITOR
The Board, including a majority of the Independent Trustees, has selected
PricewaterhouseCoopers LLP to continue to serve as independent auditors of the
Trust for the fiscal year ending December 31, 2000, subject to ratification by
the Trust's shareholders.
PricewaterhouseCoopers LLP has served as the Trust's independent auditor
since 1994 and has no direct financial interest or material indirect financial
interest in the Trust. Representatives of PricewaterhouseCoopers LLP are not
expected to be present at the Meeting but will be available if required and will
have the opportunity, at their discretion, to make a statement and to respond to
appropriate shareholder questions.
PricewaterhouseCoopers LLP's audit services for the fiscal year ended
December 31, 1999 included: auditing the Trust's annual financial statements;
reviewing the Trust's federal and state income tax returns; reviewing the
Trust's federal excise tax return; consulting with the Trust's Audit Committee;
engaging in routine consultations on financial accounting and reporting matters.
30
<PAGE>
The Audit Committee authorizes all services performed by
PricewaterhouseCoopers LLP on behalf of the Trust. In addition, the Audit
Committee reviews the scope of services to be provided by PricewaterhouseCoopers
LLP annually and considers the effect, if any, that performance of any non-audit
services might have on audit independence.
VOTE REQUIRED. As provided under the Investment Company Act, the
ratification of PricewaterhouseCoopers LLP as independent auditor for the Trust
will require the vote of a majority of the outstanding voting securities of the
Trust. Under the Investment Company Act, the vote of a "majority of the
outstanding voting securities" of an investment company (or a series thereof)
means the vote, at a duly-called annual or special meeting of shareholders, of
67% or more of the shares present at such meeting, if the holders of more than
50% of the outstanding shares of such company or series are present or
represented by proxy, or of more than 50% of the total outstanding shares of
such company or series, whichever is less.
THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE
TRUST, UNANIMOUSLY RECOMMEND THAT
THE SHAREHOLDERS OF EACH PORTFOLIO OF THE TRUST
VOTE TO APPROVE PRICEWATERHOUSECOOPERS LLP
AS INDEPENDENT AUDITOR
ADDITIONAL INFORMATION
SHARE OWNERSHIP
As of December 15, 1999 (the "Record Date"), the number of outstanding
shares of the Portfolios set forth below was as follows:
31
<PAGE>
<TABLE>
<CAPTION>
SHARES
PORTFOLIO OUTSTANDING
- --------- -----------
<S> <C>
Equity............................ 1,853,842
Small Cap......................... 6,662,578
Mid Cap........................... 432,630
Managed........................... 17,752,346
Balanced.......................... -0-
Global Equity..................... 2,228,211
U.S. Government Income............ 989,995
</TABLE>
As of the Record Date, the shares held and percentages of those shares to
the outstanding shares of each Portfolio held by the Variable Accounts of the
Life Companies and by Oppenheimer Capital, are set forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PORTFOLIOS
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS U.S. GOVT. GLOBAL EQUITY SMALL CAP MANAGED MIDCAP BALANCED
INCOME EQUITY
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Mutual 11.20% 3.37% 1.43% 4.05%
Life 110,833.568 62,458.697 95,467.096 718,327.792
Insurance shares shares shares
Company of
New York (New
York, NY) &
The MONY Life
Insurance
Company of
America, 1740
Broadway, NY,
NY 10019
Provident 37.36% 10.48% 7.47%
Mutual Life 692,383,455 697,924.582 1,325,991.915
Insurance shares shares shares
Company &
Provident
Mutual Life
and Annuity
Company of
America, 1600
Market St.,
Philadelphia,
PA 19103
Connecticut 0.37% 4.51% 2.81%
General Life 6,876.103 300,497.728 498,848.281
Insurance shares shares shares
Company &
CIGNA Life
Insurance
Company, 350
</TABLE>
32
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Church
Street, MLW
1, 12th Flr.,
Hartford, CT
06103-1106
AEGON 16.85% 4.98% 2.06%
Insurance 166,812.622 331,847.381 366,180.761
Group, 400 shares shares shares
West Market
Street,
Louisville,
KY 40202
American 71.95% 3.04% 1.80% 1.78%
Enterprise 712,299.075 56,375.475 119,793.039 316,083.256
Life shares shares shares
Insurance
Company and
American
Centurion
Life
Insurance
Company, 80
South Eighth
Street,
Minneapolis,
MN 55402
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer 23.11%
Capital, 1345 100,000
Avenue of the shares
Americas,
New York, NY
10105
- ----------------------------------------------------------------------------------------------------------------------
IL Annuity and 2.73% 2.81%
Insurance 181,943.588 498,468.987
Company, 2960 shares shares
North Meridian
Street,
Indianapolis,
IN46208
- ----------------------------------------------------------------------------------------------------------------------
PRUCO Life 57.69% 62.15%
Insurance 3,843,854.784 11,032,925.536
Company of shares shares
New Jersey
and PRUCO
Life
Insurance
Company, 751
Broad Street,
Newark, NJ
07102
- ---------------------------------------------------------------------------------------------------------------------
Transamerica, 0.99% 0.68%
Transamerica 66,017.719 120,713.832
Center 1150 shares shares
Olive Street,
Los Angeles,
CA 90015
- ---------------------------------------------------------------------------------------------------------------------
ReliaStar Life 4.34% 7.74% 4.81% 2.88%
</TABLE>
33
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Insurance 96,664.532 143,494.400 449.975 511,773.308
Company, 20 shares shares shares shares
Washington
Avenue South,
Route 1237,
Minneapolis,
MN 55401
- ---------------------------------------------------------------------------------------------------------------------
Sun Life of 17.64% 1.77% 0.28% 76.89%
Canada 327,015.391 117,604.269 49,729.451 332,630.421
(U.S.), shares shares shares
Copley Place,
Suite 200,
Boston, MA
02117
- ---------------------------------------------------------------------------------------------------------------------
Travelers 25.68%
Insurance 476,124.750
Company, One shares
Tower Square,
Hartford, CT
06183
- ---------------------------------------------------------------------------------------------------------------------
Lincoln Life 93.09% 0.06% 7.04% 10.73%
Insurance 2,074,198.537 1,115.770 468,967.818 1,905,544.583
Company, 1300 shares shares shares shares
South Clinton
Street, Fort
Wayne, IN
46802
- ---------------------------------------------------------------------------------------------------------------------
Northern Life 2.57% 4.74% 1.77% 2.30%
20 Washington 57,347.823 87,957.889 118,209.860 407,758.505
Avenue South, shares shares shares shares
Route 1237,
Minneapolis,
MN 55401
- ---------------------------------------------------------------------------------------------------------------------
Lincoln 0.06%
Benefit Life 1,155.770
Company, 206 shares
South 13th
Street, Suite
100, Lincoln,
NE 68508
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
VOTING
The Trust is subject to special voting provisions. As of the Record Date,
all Life Companies will vote shares of the Portfolios allocated to subaccounts
of their respective Variable Accounts which correspond to these Portfolios based
on instructions received from the Contractholders of such Variable Account
having the voting interest in the corresponding number of shares of each of
these Portfolios held in such Variable Account. Shares for which no
instructions are received in time to be voted will be voted by the record holder
in the same proportion as
34
<PAGE>
instructions which have been received in time to be voted. If required by state
insurance officials, a Variable Account may disregard voting instructions in
certain instances.
Subject to the foregoing, to the knowledge of the Trust, as of the Record
Date, no single person or "group" (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934) had the power to direct the vote of more than
5% of any of the outstanding shares of the Portfolios. As of the Record Date,
trustees and officers of the Trust as a group beneficially owned none of the
outstanding shares of these Portfolios.
RECEIPT OF SHAREHOLDERS PROPOSALS
Under the proxy rules of the SEC, shareholder proposals meeting tests
contained in those rules may, under certain conditions, be included in the
Trust's proxy statement and proxy for a particular annual meeting. Those rules
require that at the time the shareholder submits the proposal the shareholder be
a record or beneficial owner of at least 1% or $1,000 in market value of
securities entitled to be voted on the proposal and have held such securities
for a least one year prior thereto, and continue to hold such shares through the
date on which such meeting is held. Another of these conditions relates to the
timely receipt by the Trust of any such proposal. The Trust does not hold
regular Shareholders' meetings. Proposals of Shareholders intended to be
presented at the next meeting of Shareholders must be received a reasonable time
prior to the mailing of the proxy materials sent in connection with the meeting,
for inclusion in the proxy statement for that meeting.
The fact that the Trust receives a shareholder proposal in timely manner
does not insure its inclusion in its proxy material, since there are other
requirements in the proxy rules relating to such inclusion.
Shareholders should be aware that under the law of the Commonwealth of
Massachusetts in which the Trust is established, annual meetings of shareholders
are not required as long as there is no particular requirement under the
Investment Company Act which must be met by convening such a shareholder's
meeting. As it is the intention of the Board of Trustees not to hold annual
shareholder meetings in the future unless required to do so
35
<PAGE>
under the Investment Company Act, there can be no assurance that shareholder
proposals validly submitted to the Trust will be acted upon at a regularly
scheduled annual shareholders' meeting.
36
<PAGE>
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP are the independent auditors of the Trust.
Representatives of the firm are not expected to be present at the Meeting, but
have been given the opportunity to make a statement if they so desire, and will
be available should any matter arise requiring their presence.
MAILING OF ANNUAL REPORT
The Trust will furnish, without charge, a copy of its Annual Report for the
year ended December 31, 1998 to a shareholder upon request. Such request should
be made to the Secretary of the Trust, 1345 Avenue of the Americas, New York, NY
10105-4800, or by calling 1-800-600-5487. The report will be sent by first
class mail within three business days of the request.
OTHER BUSINESS
The Trust's management knows of no business other than the matter specified
above which will be presented at the Meeting. Inasmuch as matters not known at
the time of the solicitation may come before the Meeting, the proxy as solicited
confers discretionary authority with respect to such matters as may properly
come before the Meeting and it is the intention of the person named in the proxy
to vote in accordance with their judgment on such matters.
By Order of the Board of Trustees
Elliot M. Weiss
------------------------------------
Secretary
37
<PAGE>
OCC ACCUMULATION TRUST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
The undersigned hereby appoints _______________, _______________, and
_______________ as proxies, each with the powers to act alone and to appoint his
or her substitute, and hereby authorizes them to represent and vote, as
designated herein, all of the Shares of the OCC Accumulation Trust which the
undersigned is entitled to vote as of December 15, 1999, the record date, at the
Meeting of Shareholders to be held on March 3, 2000, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSAL IN ITEM 1, FOR THE PROPOSAL IN ITEM 2, FOR THE NOMINEES NAMED
IN ITEM 3, AND FOR THE SELECTION OF THE INDEPENDENT AUDITOR NAMED IN ITEM 4. ALL
ITEMS ARE PROPOSED BY THE OCC ACCUMULATION TRUST (THE "TRUST").
THE BOARD OF TRUSTEES RECOMMENDS THAT THE TRUST'S SHAREHOLDERS VOTE "FOR" EACH
OF THE FOLLOWING PROPOSALS:
Item 1 - Proposal to approve a new investment advisory agreement between OpCap
Advisors and the Trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 2 - Proposal to approve an investment sub-advisory agreement by and among
OpCap Advisors and Pacific Investment Management Company for the
Managed Portfolio (the "Sub-Advisory Agreement").
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE>
Item 3 - Election of the following nominees as Trustee:
[A] Joseph M. La Motta [D] Thomas W. Courtney
[B] Paul Y. Clinton [E] V. Lee Barnes
[C] Lacy B. Herrmann [F] Theodore T. Mason
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY LINING THROUGH OR
OTHERWISE STRIKING OUT THE NAME OF ANY NOMINEE.
Item 4 - Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
the independent auditor of the Trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please sign as name appears herein. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Dated: , 2000
----------------
-----------------------
Signature
-----------------------
Signature
PLEASE SIGN, DATE AND MAIL YOUR PROXY CARD BY , 2000.
-----------------
2
<PAGE>
EXHIBIT C
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of March, 2000 between OpCap Advisors (the
"Adviser"), a limited partnership, and Pacific Investment Management Company
(the "Portfolio Manager"), a limited partnership.
WHEREAS, OCC Accumulation Trust (the "Trust") is registered with the
Securities and Exchange Commission ("SEC") as an open-end, management investment
company under the Investment Company Act of 1940 and the rules and regulations
thereunder, as amended from time to time (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in separate series, with each such series representing interests in a
separate portfolio; and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 and the rules and regulations
thereunder, as amended from time to time (the "Advisers Act"); and
WHEREAS, the Trust has retained the Adviser to render management services
to the Trust's series pursuant to an Investment Advisory Agreement dated as of
November 5, 1997, and such Agreement authorizes the Adviser to engage sub-
advisers to discharge the Adviser's responsibilities with respect to the
management of such series; and
WHEREAS, the Adviser desires to retain the Portfolio Manager to furnish
investment advisory services to one or more of the series of the Trust, and the
Portfolio Manager is willing to furnish such services to such series and the
Adviser in the manner and on the terms hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Adviser and the Portfolio
Manager as follows:
1. Appointment. The Adviser hereby appoints Pacific Investment Management
-----------
Company to act as sub-advisor to the Funds set forth in Schedule A (the "Funds")
for the periods and on the terms set forth in this Agreement. The Portfolio
Manager accepts such appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
In the event the Adviser wishes to retain the Portfolio Manager to render
investment advisory services to one or more series of the Trust other than the
Funds, the Adviser shall notify the Portfolio Manager in writing. If the
Portfolio Manager is willing to render such services, it shall notify the
Adviser in writing, whereupon such series shall become a Fund hereunder, and be
subject to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
---------------------------
Board of Trustees and the Adviser, the Portfolio Manager will provide a
continuous investment program
<PAGE>
for the Funds and determine the composition of the assets of the Funds,
(with respect to the assets managed by the Portfolio Manager) including
determination of the purchase, retention, or sale of the securities, cash, and
other investments for the Funds. The Portfolio Manager will provide investment
research and analysis, which may consist of computerized investment methodology,
and will conduct a continuous program of evaluation, investment, sales, and
reinvestment of the Funds' assets by determining the securities and other
investments that shall be purchased, entered into, sold, closed, or exchanged
for the Funds, when these transactions should be executed, and what portion of
the assets of the Funds should be held in the various securities and other
investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of the Funds. To the
extent permitted by the investment policies of the Funds, the Portfolio Manager
shall make decisions for the Funds as to foreign currency matters with respect
to the assets managed by the Portfolio Manager and make determinations as to the
retention or disposition of foreign currencies or securities or other
instruments denominated in foreign currencies, or derivative instruments based
upon foreign currencies, including forward foreign currency contracts and
options and futures on foreign currencies and shall execute and perform the same
on behalf of the Funds. The Portfolio Manager will provide the services under
this Agreement in accordance with each Fund's investment objective or
objectives, investment policies, and investment restrictions as stated in the
Trust's registration statement filed on Form N-1A with the SEC, as supplemented
or amended from time to time (the "Registration Statement"), copies of which
shall be sent to the Portfolio Manager by the Adviser. In performing these
duties, the Portfolio Manager:
(1) Shall conform with the 1940 Act and all rules and regulations
thereunder, all other applicable federal and state laws and regulations,
with any applicable procedures adopted by the Trust's Board of Trustees,
and with the provisions of the Registration Statement, as supplemented or
amended from time to time.
(2) Shall use reasonable efforts to manage each Fund so that it
qualifies as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
(3) Is responsible, in connection with its responsibilities under this
Section 2, for decisions with respect to the assets managed by the
Portfolio Manager to buy and sell securities and other investments for the
Funds, for broker-dealer and futures commission merchant ("FCM") selection,
and for negotiation of commission rates. The Portfolio Manager's primary
consideration in effecting a security or other transaction will be to
obtain the best execution for the Funds, taking into account the factors
specified in the Prospectus and Statement of Additional Information for the
Trust, as they may be amended or supplemented from time to time. Subject to
such policies as the Board of Trustees may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having
caused a Fund to pay a broker or dealer, acting as agent, for effecting a
portfolio transaction at a price in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction,
if the Portfolio Manager determines in good faith that such
-2-
<PAGE>
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Portfolio Manager's
overall responsibilities with respect to the Funds and to its other clients
as to which it exercises investment discretion. To the extent consistent
with these standards, and in accordance with Section 11(a) of the
Securities Exchange Act of 1934, and subject to any other applicable laws
and regulations, the Portfolio Manager is further authorized to allocate
the orders placed by it on behalf of the Funds to the Portfolio Manager if
it is registered as a broker or dealer with the SEC, to its affiliate that
is registered as a broker or dealer with the SEC, or to such brokers and
dealers that also provide research or statistical research and material, or
other services to the Funds or the Portfolio Manager. Such allocation shall
be in such amounts and proportions as the Portfolio Manager shall determine
consistent with the above standards, and, upon request, the Portfolio
Manager will report on said allocation to the Adviser and the Board of
Trustees of the Trust, indicating the brokers or dealers to which such
allocations have been made and the basis therefor.
(4) May, on occasions when the purchase or sale of a security is
deemed to be in the best interest of a Fund as well as any other investment
advisory clients, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be
sold or purchased with those of its other clients where such aggregation is
not inconsistent with the policies set forth in the Registration Statement.
In such event, allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by the Portfolio
Manager in a manner that is fair and equitable in the judgment of the
Portfolio Manager in the exercise of its fiduciary obligations to the Trust
and to such other clients.
(5) Will, in connection with the purchase and sale of securities for
each Fund, arrange for the transmission to the custodian for the Trust on a
daily basis, such confirmations, trade tickets, and other documents and
information, including, but not limited to, Cusip, Sedol, or other numbers
that identify securities to be purchased or sold on behalf of such Fund, as
may be reasonably necessary to enable the custodian to perform its
administrative and recordkeeping responsibilities with respect to such
Fund, and, with respect to portfolio securities to be purchased or sold
through the Depository Trust Company, will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian.
(6) Will assist the custodian and recordkeeping agent(s) for the Trust
in determining or confirming, consistent with the procedures and policies
stated in the Registration Statement, the value of any portfolio securities
or other assets of each Fund for which the custodian and recordkeeping
agent(s) seek assistance from the Portfolio Manager or identify for review
by the Portfolio Manager.
(7) Will make available to the Trust and the Adviser, promptly upon
request, any of the Funds' investment records and ledgers as are necessary
to assist the Trust to comply with requirements of the 1940 Act and the
Advisers Act, as well as other
-3-
<PAGE>
applicable laws, and will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
(8) Will regularly report to the Trust's Board of Trustees on the
investment program for each Fund and the issuers and securities represented
in the Fund's portfolio, and will furnish the Trust's Board of Trustees
with respect to each Fund such periodic and special reports as the Trustees
may reasonably request.
(9) Shall be responsible for making reasonable inquiries and for
reasonably ensuring that any employee of the Portfolio Manager has not, to
the best of the Portfolio Manager's knowledge:
(1) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising
out of such person's conduct as an underwriter, broker, dealer,
investment adviser, municipal securities dealer, government securities
broker, government securities dealer, transfer agent, or entity or
person required to be registered under the Commodity Exchange Act, or
as an affiliated person, salesman, or employee of any investment
company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(2) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent
jurisdiction from acting as an underwriter, broker, dealer, investment
adviser, municipal securities dealer, government securities broker,
government securities dealer, transfer agent, or entity or person
required to be registered under the Commodity Exchange Act, or as an
affiliated person, salesman or employee of any investment company,
bank, insurance company, or entity or person to required be registered
under the Commodity Exchange Act, or from engaging in or continuing
any conduct or practice in connection with any such activity or in
connection with the purchase or sale of any security.
3. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
----------------------------------
the Registration Statement and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The Portfolio
Manager further represents and warrants that it is a duly registered investment
adviser under the Advisers Act and a duly registered investment adviser in all
states in which the Portfolio Manager is required to be registered. The Adviser
has received a current copy of the Portfolio Manager's Uniform Application for
Investment Adviser Registration on Form ADV, as filed with the SEC. The
-4-
<PAGE>
Portfolio Manager agrees to provide the Adviser with current copies of the
Portfolio Manager's Form ADV, and any supplements or amendments thereto, as
filed with the SEC.
4. Expenses. During the term of this Agreement, the Portfolio Manager
--------
will pay all expenses incurred by it and its staff and for their activities in
connection with its services under this Agreement. The Portfolio Manager shall
not be responsible for any of the following:
(1) Expenses of all audits by the Trust's independent public
accountants;
(2) Expenses of the Trust's transfer agent(s), registrar, dividend
disbursing agent(s), and shareholder recordkeeping services;
(3) Expenses of the Trust's custodial services, including
recordkeeping services provided by the custodian;
(4) Expenses of obtaining quotations for calculating the value of each
Fund's net assets;
(5) Expenses of obtaining Portfolio Activity Reports for each Fund;
(6) Expenses of maintaining the Trust's tax records;
(7) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Adviser, its subsidiaries or affiliates;
(8) Taxes, if any, levied against the Trust or any of its series;
(9) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Funds;
(10) Costs, including the interest expenses, of borrowing money;
(11) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of
the Trust to its shareholders, the filing of reports and regulatory bodies,
the maintenance of the Trust's existence, and the registration of shares
with federal and state securities or insurance authorities;
(12) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(13) Costs of printing stock certificates, if any, representing Shares
of the Trust;
(14) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
-5-
<PAGE>
(15) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(16) Association membership dues;
(17) Extraordinary expenses of the Trust as may arise, including
expenses incurred in connection with litigation, proceedings and other
claims and the legal obligations of the Trust to indemnify its trustees,
officers, employees, shareholders, distributors, and agents with respect
thereto; and
(18) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
5. Compensation. For the services provided, the Adviser will pay the
------------
Portfolio Manager a fee accrued and computed daily and payable monthly, based
on the average daily net assets of each Fund as set forth on the Schedule A
attached hereto.
6. Seed Money. The Adviser agrees that the Portfolio Manager shall not be
----------
responsible for providing money for the initial capitalization of the Trust or
any Fund.
7. Compliance.
----------
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Trust in the event (i) that the SEC has censured the Portfolio
Manager; placed limitations upon its activities, functions or operations;
suspended or revoked its registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, and
(ii) upon having a reasonable basis for believing that a Fund has ceased to
qualify or might not qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code. The Portfolio Manager further agrees to notify
the Adviser and the Trust immediately of any material fact known to the
Portfolio Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect.
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Trust;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Adviser's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, and (ii) upon having a reasonable basis for believing that any Fund has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code.
8. Independent Contractor. The Portfolio Manager shall for all purposes
----------------------
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or
-6-
<PAGE>
authorized by the Adviser from time to time, have no authority to act for or
represent the Adviser in any way or otherwise be deemed its agent. The Portfolio
Manager understands that unless expressly provided herein or authorized from
time to time by the Trust, the Portfolio Manager shall have no authority to act
for or represent the Trust in any way or otherwise be deemed the Trust's agent.
9. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Funds are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's or the
Adviser's request, although the Portfolio Manager may, at its own expense, make
and retain a copy of such records. The Portfolio Manager further agrees to
preserve the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period specified
in that Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
-----------
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC) in connection
with any investigation or inquiry relating to this Agreement or the Trust.
11. Services Not Exclusive. It is understood that the services of the
----------------------
Portfolio Manager are not exclusive, and nothing in this Agreement shall prevent
the Portfolio Manager (or its affiliates) from providing similar services to
other clients, including investment companies (whether or not their investment
objectives and policies are similar to those of the Funds) or from engaging in
other activities.
12. Liability. Except as provided in Section 13 and as may otherwise be
---------
required by the 1940 Act or other applicable law, the Adviser agrees that the
Portfolio Manager, any affiliated person of the Portfolio Manager, and each
person, if any, who, within the meaning of Section 15 of the Securities Act of
1933 (the "1933 Act") controls the Portfolio Manager shall not be liable for, or
subject to any damages, expenses, or losses in connection with, any act or
omission connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason of
reckless disregard of the Portfolio Manager's obligations and duties under this
Agreement.
13. Indemnification. The Portfolio Manager agrees to indemnify and hold
---------------
harmless, the Adviser, any affiliated person within the meaning of Section
2(a)(3) of the 1940 Act ("affiliated person") of the Adviser and each person, if
any, who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Adviser (collectively, "PM Indemnified Persons")
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or such affiliated
person or controlling person may become subject under the 1933 Act, 1940 Act,
the Advisers Act, under any other statute, at common law or otherwise, arising
out of the Portfolio Manager's responsibilities to the Trust which (i) may be
based upon any misfeasance, malfeasance, or nonfeasance by the Portfolio
Manager, any of its
-7-
<PAGE>
employees or representatives, or any affiliate of or any person acting on behalf
of the Portfolio Manager (other than a PM Indemnified Person), or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering the Shares of the
Trust or any Fund, or any amendment thereof or any supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon information furnished to
the Adviser, the Trust, or any affiliated person of the Trust by the Portfolio
Manager or any affiliated person of the Portfolio Manager (other than a PM
Indemnified Person); provided, however, that in no case is the Portfolio
Manager's indemnity in favor of the Adviser or any affiliated person or
controlling person of the Adviser deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties, or by reason of his reckless disregard of obligation and duties under
this Agreement.
The Adviser agrees to indemnify and hold harmless the Portfolio Manager,
any affiliated person within the meaning of Section 2(a)(3) of the 1940 Act of
the Portfolio Manager and each person, if any, who, within the meaning of
Section 15 of the 1933 Act controls the Portfolio Manager (collectively,
"Adviser Indemnified Persons") against any and all losses, claims, damages,
liabilities or litigation (including legal and other expenses) to which the
Portfolio Manager or such affiliated person or controlling person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Adviser's
responsibilities as adviser of the Trust which (i) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Adviser, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Adviser (other than an Adviser Indemnified Person) or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering Shares of the Trust or any Fund,
or any amendment thereof or any supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, unless such statement or
omission was made in reliance upon written information furnished to the Adviser
or any affiliated person of the Adviser by the Portfolio Manager or any
affiliated person of the Portfolio Manager (other than an Adviser Indemnified
Person); provided, however, that in no case is the indemnity of the Adviser in
favor of the Portfolio Manager, or any affiliated person or controlling person
of the Portfolio Manager deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties, or
by reason of his reckless disregard of obligations and duties under this
Agreement.
14. Duration and Termination. This Agreement shall take effect as of the
------------------------
date hereof, and shall remain in effect for two years from such date, and
continue thereafter on an annual basis with respect to a Fund; provided that
such annual continuance is specifically approved at least annually (a) by the
vote of a majority of the entire Board of Trustees of the Trust, or (b) by the
vote of a majority of the outstanding voting securities (as such term is defined
in the 1940 Act) of that Fund, and provided that continuance is also approved by
the vote of a majority of the Board of Trustees of the Trust who are not parties
to this Agreement or "interested persons" (as such term is defined in the 1940
Act) of the Trust, the Adviser, or the Portfolio Manager, cast in person
-8-
<PAGE>
at a meeting called for the purpose of voting on such approval. This Agreement
may not be materially amended with respect to a Fund without the vote of a
majority of the outstanding voting securities (as such term is defined in the
1940 Act) of that Fund. This Agreement may be terminated:
(1) by the Trust at any time with respect to the services provided by
the Portfolio Manager, without the payment of any penalty, by vote of a
majority of the entire Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities (as such term is defined in
the 1940 Act) of the Trust or, with respect to a particular Fund, by vote
of a majority of the outstanding voting securities of that Fund, on 60
days' written notice to the Portfolio Manager;
(2) by the Portfolio Manager at any time, without the payment of any
penalty, upon 60 days' written notice to the Trust;
(3) by the Adviser at any time, without the payment of any penalty,
upon 60 days' written notice to the Portfolio Manager.
However, any approval of this Agreement by the holders of a majority of the
outstanding voting securities (as such term is defined in the 1940 Act) of a
particular Fund shall be effective to continue this Agreement with respect to
the Fund notwithstanding (a) that this Agreement has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund or
other series of the Trust or (b) that this Agreement has not been approved by
the vote of a majority of the outstanding voting securities of the Trust, unless
such approval shall be required by any other applicable law or otherwise. This
Agreement will terminate automatically with respect to the services provided by
the Portfolio Manager in the event of its assignment, as that term is defined in
the 1940 Act, by the Portfolio Manager.
15. Agreement and Declaration of Trust. A copy of the Declaration of Trust
----------------------------------
of the Trust is on file with the Secretary of State of the Commonwealth of
Massachusetts. Notice is hereby given that this Agreement is executed on behalf
of the Trustees of the Trust as Trustees and not individually, and that the
obligations of or arising out of this Agreement are not binding upon any of the
Trustees, officers or shareholders of the Trust individually, but are binding
only upon the assets and property of the Trust.
16. Proxies. Unless the Adviser gives written instructions to the contrary,
-------
the Portfolio Manager shall vote all proxies solicited by or with respect to the
issuers of securities in which assets of the Fund may be invested by the
Portfolio Manager. The Portfolio Manager shall maintain a record of how the
Portfolio Manager voted and such record shall be available to the Adviser upon
its request. The Portfolio Manager shall use its best good faith judgement to
vote such proxies in a manner which best serves the interests of the Fund's
shareholders.
-9-
<PAGE>
17. Notices. Any written notice required by or pertaining to this
-------
Agreement shall be personally delivered to the party for whim it is intended, at
the address stated below, or shall be sent to such party by prepaid first class
mail or by facsimile.
If to the Adviser: PIMCO Advisors L.P.
1345 Avenue of the Americas, 50th Flr.
New York, NY 10105-4800
Fax: 212-739-3948
Attention: Chief Legal Officer
cc:
If to the Sub-Advisor: Pacific Investment Management Company
840 Newport Center Drive
Newport Beach, CA 92660
Fax: 949-720-6403
Attention: Chief Administrative Officer
cc: Account Manager
18. Confidential Information. The Portfolio Manager shall maintain the
------------------------
strictest confidence regarding the business affairs of the Fund. Written
reports furnished by the Portfolio Manager to the Advisor shall be treated by
the Advisor and the Portfolio Manager as confidential and for the exclusive use
and benefit of the Advisor except as disclosure may be required by applicable
law.
19. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of the State of New York,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(c) If any provisions of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise with regard to any party hereunder, such provisions with respect to
other parties hereto shall not be affected thereby.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
OPCAP ADVISORS
_____________________________ By:____________________________
Attest: Title:
Title:
PACIFIC INVESTMENT
MANAGEMENT COMPANY
______________________________ By:____________________________
Attest: Title:
Title
-11-
<PAGE>
SCHEDULE A
----------
FUND ANNUAL FEE RATE*
- ---- ---------------
Managed Bond Fund** 25 bps
* The Annual Fee Rates are based on the average daily net assets of the
particular Fund taken separately.
** Based upon the percentage of assets managed.
-12-
<PAGE>
EXHIBIT A
OpCap Advisors is the manager or subadviser to the registered investment
companies listed below. These investment companies have similar investment
objectives to at least one of the Portfolios.
<TABLE>
<CAPTION>
Approximate
Net Assets
Fund (as of 12/31/99) Advisory Fee Rate
- ---- ----------------- -----------------
<S> <C> <C>
Oppenheimer Quest Value Fund, Inc. $1,438,754,183 1.0% on the first $400 million; .90% on the next $400 million;
.85% of net assets in excess of $800 million(1)
Oppenheimer Quest Opportunity
Value Fund $4,050,153,131 Same as above
Oppenheimer Quest Small
Cap Value Fund $ 248,148,872 Same as above
Oppenheimer Quest Global
Value Fund, Inc. $ 565,405,358 .75% of the first $400 million of average net assets; .70% of
the next $400 million and .65% of average net assets in
excess of $800 million(1)
Enterprise Accumulation Trust:
Managed Portfolio $1,143,777,218 .40% of the first $1 billion; .30% on assets over $1 billion;
and .25% for assets in excess of $2 billion(2)
Enterprise Group of Funds:
Managed Portfolio $ 191,205,503 .40% on the first $100 million; .30% on assets in excess of
$100 million(3)
Penn Series Funds, Inc.
Value Equity Fund $ 288,994,257 .40% with respect to the first $50 million of the combined
total average daily net assets of the two funds; .35% with
respect to the next $200 million of the combined total average
daily net assets of the two funds; and .30% with respect to the
combined total average daily net assets of the two funds in
excess of $250 million
Small Capitalization Fund $ 43,793,630 Same as above
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Approximate
Net Assets
Fund (as of 12/31/99) Advisory Fee Rate
- ---- ----------------- -----------------
<S> <C> <C>
Endeavor Series Trust:
Value Equity Portfolio $209,597,451 .40%(5)
Opportunity Value Portfolio $ 44,843,438
The Saratoga Advantage Trust:
Large Capitalization Value Portfolio $ 78,402,989 .30%(6)
</TABLE>
- ----------------------
(1) With respect to each of these funds, OppenheimerFunds, Inc. ("OFI") is the
investment adviser and OpCap Advisors is the sub-adviser. OFI also receives
a .25% administrative fee with respect to the Oppenheimer Quest Global
Value Fund, Inc. OFI pays OpCap Advisors monthly an annual fee based on the
average daily net assets of the fund equal to 40% of the advisory fee (and
administrative fee with respect to the Oppenheimer Quest Global Value Fund,
Inc.) collected by OFI based on the total net assets of the fund as of
November 22, 1995 (the "base amount") plus 30% of the investment advisory
fee (and administrative fee with respect to the Oppenheimer Quest Global
Value Fund, Inc.) collected by OFI based on the total net assets of the fund
that exceed the base amount.
A-2
<PAGE>
(2) These fees are for investment advisory services only. Management services
are provided to the portfolios by a third party, not OpCap Advisors. The
Manager, who pays the investment advisory fee to OpCap Advisors, receives a
management fee, on an annual basis, of .80% of the first $400 million of
the average daily net assets; .75% on the next $400 million and .70% on
assets above $800 million of each of the portfolios.
(3) This fee is for investment advisory services only. Management services are
provided to the portfolios by a party other than OpCap Advisors. The
Manager, who pays the investment advisory fee to OpCap Advisors, receives a
management fee of .75% of the average daily net assets of the portfolio.
(4) These fees are for investment advisory services only. The Manager, who pays
the investment advisory fee to OpCap Advisors, receives a management fee of
.50% of the average daily net assets of the funds.
(5) This fee is for investment advisory services only. Management services are
provided to the portfolios by a party other than OpCap Advisors. The
Manager, who pays the investment advisory fee to OpCap Advisors, receives a
management fee of .80% of average daily net assets of the portfolios.
(6) This fee is for investment advisory services only. Management services are
provided to the portfolio by a party other than OpCap Advisors. The
Manager, who pays the investment advisory fee to OpCap Advisors, receives a
management fee of .65% of the average daily net assets of the portfolio.
A-3
<PAGE>
EXHIBIT B
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made as of the 5th day of November, 1997, as amended this 1st day of
February, 1998 and this 1st day of May 1999, and this 8th day of December 1999,
by and between OCC ACCUMULATION TRUST (formerly called Quest for Value
Accumulation Trust and before that, Quest for Value Asset Builder Trust), a
Massachusetts business trust (the "Fund") and OPCAP ADVISORS (formerly called
Quest for Value Advisors), a Delaware general partnership (the "Manager").
WHEREAS, the Fund is an open-end, diversified, management investment company,
organized in "series" form and comprised of twelve separate investment
portfolios (the "Portfolios" or the "Series") and is registered with the
Securities and Exchange Commission (the "Commission") pursuant to the Investment
Company Act of 1940 (the "1940 Act");
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Fund and the Manager agree as follows:
1. General Provisions
------------------
The Fund hereby employs the Manager and the Manager hereby undertakes to act
as the investment adviser of the Fund in connection with and for the benefit of
each Portfolio, including any Portfolio hereafter created, and to perform for
the Fund and for each of the Portfolios such other duties and functions in
connection with each Portfolio for the period and on such terms as set forth in
this Agreement. The Manager shall, in all matters, give to the Fund and its
Board of Trustees (the "Trustees") the benefit of its best judgment, effort,
advice and recommendations and shall at all times conform to, and use its best
efforts to enable the Fund to conform to:
(a) the provisions of the 1940 Act and any rules or regulations thereunder;
(b) any other applicable provisions of state or federal law;
(c) the provisions of the Declaration of Trust and By-Laws of the Fund as
amended from time to time;
(d) the policies and determinations of the Trustees;
(e) the investment objectives and policies and investment restrictions of
each Portfolio as reflected in the registration statement of the Fund
under the 1940 Act or as such objectives, policies and restrictions
may from time to time be amended; and
(f) the prospectus, if any, of the Fund in effect from time to time.
The appropriate officers and employees of the Manager shall be available upon
reasonable notice for consultation with any of the Trustees or officers with
respect to any matters dealing with the Fund's business affairs, including the
valuation of any securities held by the Fund for the benefit of any Portfolio
that are either not registered for public sale or not being traded on any
securities market.
<PAGE>
2. Investment Management
---------------------
(a) The Manager shall, subject to the direction and control by the
Trustees, separately with respect to each Portfolio: (i) regularly
provide investment advice and recommendations to the Fund with respect
to it's investments, investment policies, and the purchase and sale of
securities and commodities; (ii) supervise continuously and determine
the securities and commodities to be purchased or sold by the Fund and
the portion, if any, of the Fund's assets to be held uninvested; and
(iii) arrange, subject to the provisions of Section 6 hereof, for the
purchase and sale of securities, commodities and other investments by
the Fund.
(b) The Manager may obtain investment information, research or assistance
from any other person, firm or corporation to supplement, update or
otherwise improve its investment management services, including entering
into sub-advisory agreements with other affiliated or unaffiliated
registered investment advisers in order to obtain specialized services;
provided, however, that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement and
subject to the provisions of Section 5 hereof.
(c) So long as the Manager shall have acted with due care and in good
faith, the Manager shall not be liable to the Fund or its shareholders for
any error in judgment, mistake of law, or any other act or omission in the
course of or connected with, rendering services hereunder, including
without limitation, any losses which may be sustained by the Fund or its
shareholders as a result of the purchase, holding, redemption, or sale of
any security by the Fund irrespective of whether the determinations of the
Manager relative thereto shall have been based, in whole or in part, upon
the investigation, research or recommendation of any other individual, firm
or corporation believed by the Manager to be reliable. Nothing herein
contained shall, however, be construed to protect the Manager against any
liability to the Fund or its shareholders arising out of the Manager's
willful misfeasance, bad faith, or gross negligence in the performance of
its duties or reckless disregard of its obligations and duties under this
Agreement.
(d) Nothing in this Agreement shall prevent the Manager, any parent,
subsidiary or affiliate, or any director or officer thereof, from acting as
investment adviser for any other person, firm, or corporation, and shall
not in any way limit or restrict the Manager or any of its directors,
officers, stockholders or employees from buying, selling or trading any
securities or commodities for its or their own account or for the account
of others for whom it or they may be acting, if such activities will not
adversely affect or otherwise impair the performance by the Manager of its
duties and obligations under this Agreement.
3. Other Duties of the Manager
---------------------------
The Manager shall, at its own expense, provide and supervise the activities of
all administrative and clerical personnel and shall be required to provide
effective corporate
2
<PAGE>
administration for the Fund, including (1) coordination of the functions of
accountants, counsel and other parties performing services for the Fund, (2) the
preparation and filing of such reports related to the Fund or to any Portfolio
as shall be required by federal securities laws and various state "blue sky"
laws, (3) composition of periodic reports with respect to its operations for
shareholders of the Fund and (4) composition of proxy materials for meetings of
the Fund's shareholders.
4. Allocation of Expenses
----------------------
The Manager will bear all costs and expenses of its employees and overhead
incurred by it in connection with its duties hereunder except as noted in
Section 5 below. All other expenses (other than those to be paid by the Fund's
distributor under a distribution agreement), shall be paid by the Fund,
including, but not limited to:
(a) interest expense, taxes and governmental fees;
(b) brokerage commissions and other expenses incurred in acquiring or
disposing of the Fund's securities and commodities holdings;
(c) insurance premiums for fidelity and other coverage requisite to the
Fund's operations;
(d) fees of the Trustees other than those who are interested persons
of the Fund and out-of-pocket travel expenses for all Trustees and other
expenses incurred by the Fund in connection with Trustees' meetings;
(e) outside legal, accounting and audit expenses;
(f) custodian, dividend disbursing, and transfer agent fees and expenses;
(g) expenses in connection with the issuance, offering, sale or
underwriting of securities issued by the Fund, including preparation of
stock certificates;
(h) fees and expenses, other than as herein above provided, incident to the
registration or qualification of the Fund's shares for sale with the
Commission and in various states and foreign jurisdictions;
(i) expenses of printing and mailing reports and notices and proxy material
to the Fund's shareholders;
(j) all other expenses incidental to holding meetings of the Fund's
shareholders;
(k) expenses of organizing the Fund; and
(l) such extraordinary non-recurring expenses as may arise, including
litigation affecting the Fund and the legal obligation the Fund may have to
indemnify its officers and Trustees with respect thereto.
3
<PAGE>
Notwithstanding the foregoing, the Manager shall pay all salaries and fees of
each of the Fund's officers and Trustees who are interested persons of the
Manager.
5. Compensation of the Manager
---------------------------
(a) The Fund agrees to pay the Manager, and the Manager agrees to accept as
full compensation for the performance of all its functions and duties to be
performed hereunder, a fee based on the total net assets of each Portfolio
at the end of each business day. Determination of net asset value of each
Portfolio will be made in accordance with the policies disclosed in the
Fund's registration statement under the 1940 Act. The fee is payable at the
close of business on the last day of each calendar month and shall be made
on the first business day following such last calendar day. The payment due
on such day shall be computed by (1) adding together the results of
multiplying (i) the total net assets of each Portfolio on each day of the
month by (ii) the applicable daily fraction of the annual advisory fee
percentage rate for such Portfolio as set forth on Schedule A hereto and
then (2) adding together the total monthly amounts computed for each
Portfolio.
(b) In the event the operating expenses (net of any expense offsets) of the
Fund, including any amounts payable to the Manager pursuant to subsection
(a) hereof, but excluding the amount of any interest, taxes, brokerage
commissions, distribution fees, and extraordinary expenses (including but
not limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund for any fiscal
year ending on a date during which this Agreement is in effect, exceed the
most restrictive state law provisions in effect in states where the Fund is
qualified to be sold, the Manager will pay or refund to the Fund any such
excess amount. In addition, the Manager shall waive any amounts payable to
the Manager pursuant to subsection (a) hereof, and reimburse the Fund such
that total operating expenses (net of any expense offsets) of each of the
Portfolios of the Fund except the Global Equity Portfolio do not exceed
1.00% of their respective average daily net assets and such that total
operating expenses (net of any expense offsets) of the Global Equity
Portfolio do not exceed 1.25% of its average daily net assets. Whenever the
expenses of a Portfolio exceed a pro rata portion of the expense
limitations stated above, the monthly amount payable to the Manager will be
reduced or postponed in the amount of such excess.
6. Portfolio Transactions and Brokerage
------------------------------------
(a) The Manager is authorized, in arranging the purchase and sale of the
Fund's portfolio securities, to employ or deal with such members of
securities exchanges and brokers or dealers, including CIBC Oppenheimer
Corp. ("CIBC Oppenheimer") ("broker/dealer"), as may, in the Manager's best
judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution of the Fund's securities transactions at the most favorable
security prices obtainable of the Fund's securities transactions) as well
as to obtain, consistent with the provisions of subparagraph (c) of this
Section 6, the benefit of such investment information or research as will
be of significant
4
<PAGE>
assistance to the Manager in the performance of its functions and duties
under this Agreement.
(b) The Manager shall select broker/dealers to effect the Fund's securities
transactions on the basis of its estimate of the ability of such
broker/dealers to obtain best execution of particular and related
securities transactions. The ability of a broker/dealer to obtain best
execution of particular securities transaction(s) will be judged by the
Manager on the basis of all relevant factors and considerations, including,
insofar as feasible, the execution capabilities required by the
transactions; the ability and willingness of the broker/dealer to
facilitate the Fund's securities transactions by participating therein for
its own account; the importance to the Fund of speed, efficiency or
confidentiality; the broker/dealer's apparent familiarity with sources from
or to whom particular securities might be purchased or sold; and any other
matters relevant to the selection of a broker/dealer for particular and
related transactions of the Fund.
(c) The Manager shall have discretion, in the interests of the Fund, to
allocate brokerage on the Fund's securities transactions to broker/dealers
qualified to provide best execution of such transactions who provide
brokerage and/or research services (as such services are defined in Section
28(e)(3) of the Securities Exchange Act of 1934 (the "1934 Act")) for the
Fund and/or other accounts for which the Manager exercises investment
discretion (as that term is defined in Section 3(a)(35) of the 1934 Act)
and to cause the Fund to pay such broker/dealers (other than CIBC
Oppenheimer) a commission for effecting a securities transaction for the
Fund that is in excess of the amount of commission another broker/dealer
adequately qualified to effect such transaction would have charged for
effecting that transaction, if the Manager determines, in good faith, that
such commission is reasonable in relation to the value of the brokerage
and/or research services provided by such broker/dealer, viewed in terms of
either that particular transaction or the Manager's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion. In reaching such determination, the Manager will not
be required to place or attempt to place a specific dollar value on the
brokerage and/or research services provided by such broker/dealer. In
demonstrating that such determinations were made in good faith, the Manager
shall be prepared to show that all commissions were allocated to such
broker/dealers for purposes contemplated by this Agreement and that the
total commissions paid by the Fund over a representative period selected by
the Trustees were reasonable in relation to the benefits received by the
Fund. Such research information may be in written form or through direct
contact with individuals, and may include information on particular
companies and industries as well as market, economic or institutional
activity areas.
(d) The Manager shall have no duty or obligation to seek advance
competitive bidding for the most favorable commission rate applicable to
any particular securities transactions or to select any broker/dealer on
the basis of its purported or "posted" commission rate, although it will,
to the best of its ability, endeavor to be aware of the current level of
the charges of eligible broker/dealers and to minimize the expense incurred
by the Fund for effecting its securities transactions to the
5
<PAGE>
extent consistent with the interests and policies of the Fund as
established by the determinations of the Trustees and the provisions of
this Section 6.
(e) The Fund recognizes and intends that, subject to the foregoing
provisions of this Section 6, CIBC Oppenheimer will act as its regular
broker so long as it is lawful for it so to act and that CIBC Oppenheimer
may be a major recipient of brokerage commissions paid by the Fund. CIBC
Oppenheimer may effect securities transactions for the Fund only if (1) the
commissions, fees or other remuneration received or to be received by it
are reasonable and fair compared to the commissions, fees or other
remuneration received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time and (2) to the
extent required, the Trustees, including a majority of those Trustees who
are not interested persons, have adopted procedures pursuant to Rule 17e-1
under the 1940 Act for determining the permissible level of such
commissions.
(f) Sales of shares of the Fund and/or shares of the other investment
companies managed by the Manager or distributed by the Fund's distributor
may, subject to applicable rules covering the distributor's activities in
this area, also be considered as a factor in the direction of securities
transactions to dealers, but only in conformity with the price, execution
and other considerations and practices discussed above. Those other
investment companies may also give similar consideration relating to the
sale of the Fund's shares. The Fund will not purchase any securities from
or sell any securities to CIBC Oppenheimer acting as principal for its own
account.
(g) When orders to purchase or sell the same security on identical terms
are placed by more than one of the funds and/or other advisory accounts
managed by the Manager or its affiliates, the transactions are generally
executed as received, although a fund or advisory account that does not
direct trades to a specific broker ("free trades") usually will have its
order executed first. Purchases are combined where possible for the purpose
of negotiating brokerage commissions, which in some cases might have a
detrimental effect on the price or volume of the security in a particular
transaction as far as the Fund is concerned. Orders placed by accounts that
direct trades to a specific broker will generally be executed after the
free trades. All orders placed on behalf of the Fund are considered free
trades. However, having an order placed first in the market does not
necessarily guarantee the most favorable price.
7. Duration
--------
This Agreement will become effective as of the date hereof. This Agreement
will continue in effect for two years from the date hereof and thereafter
(unless sooner terminated in accordance with this agreement) for successive
periods of twelve months so long as each continuance shall be specifically
approved at least annually with respect to each Portfolio by (1) the vote of a
majority of those Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (2) a majority of the
6
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Trustees or of a majority of the outstanding voting securities of the respective
Portfolios of the Fund.
8. Termination
-----------
This Agreement may be terminated (i) by the Manager at any time, without
payment of any penalty upon giving the Fund ninety (90) days' written notice
(which notice may be waived by the Fund); or (ii) by the Fund at any time,
without payment of any penalty upon sixty (60) days' written notice to the
Manager (which notice may be waived by the Manager), provided that such
termination by the Fund shall be directed or approved by the vote of the
majority of all of the Trustees or by the vote of a majority of the outstanding
voting securities of the Portfolios of the Fund with respect to which notice of
termination has been given to the Manager.
9. Amendment or Assignment
-----------------------
This Agreement may be amended with respect to a Portfolio only if such
amendment is specifically approved by (i) the vote of the outstanding voting
securities of such Portfolio and (ii) a majority of the Trustees, including a
majority of those Trustees who are not parties to this Agreement or interested
persons of such party, cast in person at a meeting called for the purpose of
voting on such approval, provided that this Agreement may be amended to add a
new Portfolio or delete an existing Portfolio without a vote of the shareholders
of any other Portfolio covered by this Agreement. This Agreement shall
automatically and immediately terminate in the event of its assignment, as that
term is defined in the 1940 Act and the rules thereunder provided.
10. Governing Law
-------------
This Agreement shall be interpreted in accordance with the laws of the State
of New York and the applicable provisions of the 1940 Act, other securities laws
and rules thereunder. To the extent that the applicable laws of the State of
New York, other securities laws or any of the provisions herein, conflict with
the applicable provisions of the 1940 Act, the latter shall control.
11. Severability
------------
If any provisions of this Agreement shall be held or made unenforceable by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
12. Definitions
-----------
As used in this Agreement, the terms "interested person" and "vote of a
majority of the outstanding securities" shall have the respective meanings set
forth in Sections 2(a)(19) and 2(a)(42) of the 1940 Act.
7
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13. No Liability of Shareholders
----------------------------
This Agreement is executed by the Trustees of the Fund, not individually, but
rather in their capacity as Trustees under the Declaration of Trust made May 12,
1994. None of the Shareholders, Trustees, officers, employees, or agents of the
Fund shall be personally bound or liable under this Agreement, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
hereunder but only to the property of the Fund and, if the obligation or claim
relates to the property held by the Fund for the benefit of one or more but
fewer than all Portfolios, then only to the property held for the benefit of the
affected Portfolio.
14. Notice of Change in Partnership of Manager
------------------------------------------
The Manager agrees to notify the Fund within a reasonable period of time
regarding a material change in the membership of the Manager.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OCC ACCUMULATION TRUST
Attest:
_______________________ By:____________________________
Title:
OPCAP ADVISORS
Attest:
______________________ By:____________________________
Title:
8
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Schedule A
----------
to
Investment Advisory Agreement between OCC Accumulation Trust and OpCap Advisors
-------------------------------------------------------------------------------
Annual Fee as a Percentage of
-----------------------------
Name of Series Daily Net Assets
- -------------- ----------------
Equity Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Mid Cap Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Small Cap Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Managed Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Global Equity Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Balanced Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Blended Equity Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Large Cap Growth Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Small Cap Growth Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
Innovation Portfolio 0.80% on first $400 million
0.75% on next $400 million
0.70% thereafter
9
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Schedule A
----------
Cont'd
------
Annual Fee as a Percentage of
-----------------------------
Name of Series Daily Net Assets
- -------------- ----------------
U.S. Government Income Portfolio .60%
Bond Portfolio .50%
Money Market Portfolio .40%
10
